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Tuesday
March 24th
2015

SURPRISES & DISAPPOINTMENTS BEGIN

John Rubino

 

SPECIAL GUEST HOST: JOHN RUBINO, Author & Publisher of DollarCollapse.com

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SURPRISES & DISAPPOINTMENTS BEGIN!

with John Rubino & Gordon T Long

Published 03-24-15

36 Minute Video

John Rubino and Gordon T Long discuss the overwhelming number of negative economic surprises and disappointments presently occurring.

Against this backdrop within this 36 minute video, they consider what is holding the markets up, how long this is likely to continue and what to expect from the central bankers going forward.

Both are very optimistic about the future but not before the capitalist system is allowed to do its magic of clearing out malinvestment and then through price discovery and the correct pricing risk, allow investment to return and propel the global economy forward.

 

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Monday
March 23rd,
2015

GUIDO HULSMANN talks FINANCIAL REPRESSION

Guido Hulsmann

 

 

SPECIAL GUEST: Jörg Guido Hülsmann , is a professor of economics at the University of Angers in France and adherent of the Austrian School. He has edited six books and is the author of The Ethics of Money Production and Mises: The Last Knight of Liberalism. He has translated several renowned economics books into German and written many articles in English, French, and German. He is a contributor to scholarly journals such as the Quarterly Journal of Austrian EconomicsThe Independent ReviewProcesos de Mercado, and the Journal of Markets and Morality, as well as to magazines and newspapers such as La Tribune (France), Finanz und Wirtschaft (Switzerland), Le Temps(Switzerland), Wiener Zeitung (Austria), and eigentümlich frei (Germany).

Professor Hülsmann is the director of the Austrian Research Seminar in Paris.

FINANCIAL REPRESSION

"Financial Repression is the name we give to all the different government interventions in which governments seek to improve their own bargaining position with financial markets."

"As a consequence of Financial Repression (that is of government intervention) people use their savings differently than they would otherwise have used. Therefore different people benefit from those savings (most probably the government itself) to a greater extent than otherwise would have been the case."

FINANCIAL REGULATION

"The most surprising developments have been regulation, like the Dodd-Frank Act, Basel III, FATCA. They are pretty intrusive. These regulations have been sold to the public as necessary to control the financial markets, which is certainly the case but this is one side, the other is precisely the cause. Governments control the markets and can force Insurance Companies, Banks, Investment Trusts to use their funds in a certain way that governments are then ready to benefit from. This is very often at the expense of the savers."

EXPECTED TRENDS

INCREASED REGULATIONS

The amount of paperwork and red tape that will be required to comply with expanding regulations is already growing dramatically. "We already require by law in Europe, for example, for an Investment Fund to have a Risk Officer who reports directly to the Ministry of Finance. It is absolutely mind boggling and it makes it very difficult for people to continue doing business profitably - it makes it quite miserable unless you are a big firm!" "These rules boil down to squeezing all small and even medium sized businesses out of business!"

'FORCED LENDING TO THE STATE OF FORCED SAVINGS'

"I expect a trend that will become much larger and more important in the future is what I call "Forced Lending to the State of Forced Savings!" Professor Hulsmann sees Pensions as being a particularly attractive target for this sort of trend.

PRICE RIGGING

We have already seen this most evidently in the area of Precious Metals price rigging. "This is because they are the natural alternative to hold savings outside of Financial Markets and Real Estate Markets! Both are artificially bloated thanks to central bank policy."... "it is natural that people turn to Precious Metals because there is no counterparty risk".

LEGAL PRIVILEGE

"Under a fiat money standard, governments (or their central banks) may obligate themselves to bail out, with increased issues of standard money, any bank or any major bank in distress. In the late nineteenth century, the principle became accepted that the central bank must act as the "lender of last resort", which will lend money freely to banks threatened with failure. Another recent American device to abolish the confidence limitation on bank credit is "deposit insurance", whereby the government guar­antees to furnish paper money to redeem the banks’ demand li­abilities. These and similar devices remove the market brakes on rampant credit expansion.

According to Hülsmann, there are four groups of legal privileges granted by the state (usually more than one is granted):

  • Legalized Counterfeiting - the promises of banks are allowed to be more "elastic". For example, a coin marked "an ounce of gold" will be allowed to have any amount of gold or none, and can have any meaning. Banknotes were named "promises to pay", but were obscure on the details.
  • Monopoly - only some monetary products may be produced by law, like a specific metal; or only the banknotes or coins of a certain bank. This limits the freedom of choice of users of money and benefits the producers and first recipients at the detriment of others.
  • Legal Tender is a money, that must be accepted in exchanges under a predefined price. Some monies may be driven out of the market due to Gresham's Law.
  • Legalized Suspension of Payments allows banks to avoid paying their obligations, while receiving payments from their debtors. If a bank is freed from contractual obligations to redeem its money and it is also legal tender, its banknotes become genuine paper money.

With legal privileges the banks are allowed to behave more irresponsibly, which increases moral hazard.

PERMANENT POSITIVE PRICE INFLATION RATE

"Without a Fiat Currency system it is impossible to create a permanent positive price inflation rate. With the gold standard the tendency for the price level was generally deflationary... a constantly declining price levels."

"If you have declining prices then there is a very strong incentive for savers to not worry about any financial investments at all, but to just save in the form of cash ... when you have constantly increasing prices... holding cash becomes suicidal for savers. You then have only two choices. Buy Real Estate or Financial Titles. You get promises of remuneration for your savings so you are partially compensated for the lose of purchasing power."

"Deflationary Recessions are a healing process - it is what precisely gets the economy back in touch with the real world and allow you to move forward event more forcibly!

 

Please link to the page of our Austrian research seminar:

AND ask your readers to get in touch with me (jgh@guidohulsmann.com) to make a donation.

All donations are tax-deductable.

 

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Thursday
March 19th,
2015

MARSHALL AUERBACK talks FINANCIAL REPRESSION

Marshall Auerback

 

 

SPECIAL GUEST: MARSHALL AUERBACK , Director of Institutional Partnerships, Institute for New Economic Thinking. Auerback has over 20 years of experience in the investment management business. He served as a director and global portfolio strategist for the Canada-based fund management group Pinetree Capital. He also was head of economic research for Madison Street Partners, a Denver-based investment management group, and he worked as an economic consultant to PIMCO, the world’s largest bond fund management group.  In addition, Auerback is a Research Associate at the Levy Economics Institute of Bard College and a Research Fellow for the Economists for Peace and Security. (http://www.epsusa.org)

Previously, Auerback managed the Prudent Global Fixed Income Fund for David W. Tice & Associates and assisted with the management of the Prudent Bear Fund. He also worked as an international economics strategist for Veneroso Associates, which provided macroeconomic strategy to a number of leading institutional investors. Prior to that, Auerback ran an emerging markets fund for Tiedemann Investment Group in New York. He began his finance career as an investment manager at GT Management, focusing on the markets of Japan, Australia, and the Pacific Rim, while based in Hong Kong and then Tokyo.

Auerback graduated magna cum laude from Queen’s University in Canada and received a post-graduate masters degree from Oxford University.

FINANCIAL REPRESSION

"Financial Repression can be a fairly loaded word. I think you can say that anytime you have a central bank which is a monopoly of anything, which can establish a price, you can have repression. I am less concerned with the labels and more concerned with the fact that we have been in response to this unprecedented crisis, been increasingly undertaking exotic experiments on behalf of the central banks. Most notably Quantitative Easing. It has had the effect of repressing interest rates or keeping them low. This of course is great for borrowers, but has the unintended by-product of depriving people of income."

A FLAWED SYSTEM

Financial Repression is an experiment that " is flawed in terms of the economics behind it. I don't think it does much to help elevate aggregate demand (spending power) and it turns out to be a large implicit subsidy for the financial sector."

"As far as I am concerned we are already over-financed as an economy and do too much for the banks anyway. It is really a fundamentally mistaken policy approach!"

TRENDS SINCE THE FINANCIAL CRISIS

"We have had three rounds of Quantitative Easing by the Fed, we have undertaken similar policies in Japan and more recently in Europe. If you look at the impact it has been rather minimal! The Japanese economy is still pretty stagnant. The US is growing but I believe that has less to do with QE and more to do with the fact that we had a fairly robust fiscal policy response after the crisis in 2009. Likewise in Europe we have been mired in depression like numbers which is worse than anything we had in the 1930s. It hasn't worked but we keep trying it."

"The economics behind it are flawed. it is based on the notion that if a bank buys a bond and puts reserves into the banking system that somehow it can encourage the banker to lend. We actually don't lend out reserves and are only used for interbank lending amongst banks. Also lending is a two way process. You have to have a credit worthy borrower and a credit worthy lender. If you have individuals or business that are piled down with debt they may not be very credit worthy or they may be less inclined to take on more debt"

"You want to engender rising employment, rising income so people aren't as reliant on credit. I think that is the problem our system has had over the last 30 years. We have become Credit centric versus Income centric!"

"We have been conducting this 'pulmonary resuscitation' to a fundamentally dead financial system rather than use the money to revive the economy and transition it into more productive economic activity."

CONTROL FRAUD

"When you have an economy that is over financialized and banks account for a disproportionate amounts of activity, and you have a compensation incentive system that is highly dependent on share price appreciation, then you provide a very perverse incentive for business not to invest in productive business affairs but to use excessive cash to buyback shares."

"What is worse is you begin to use all sorts of accounting tricks. This is what Professor Bill Black calls 'Control Fraud' . You get a form of casino capitalism. Actually, the casinos in Las Vegas are regulated more favorably than the banks are."

PRIVATE DEBT BUILD-UP

Marshall Auerback believes we have had excessive build-up in Corporate and Household debt. "When you have a demand shock, then servicing that debt becomes a problem. You end up with a large build-up of public debt in response." Unfortunately those who benefited now want cuts to things like Medicare that were not the cause of the problem. "Its a pretty perverse example of the wrong headed people running our system."

EMPLOYMENT - JOB GUARANTEE PROGRAM

TIME FOR A NEW APPROACH ON UNEMPLOYMENT: GOVERNMENT AS EMPLOYER OF LAST RESORT  By Marshall Auerback

At 10.2%, official American unemployment is now at its highest level since 1983 (http://finance.yahoo.com/news/Jobless-rate-tops-10-pct-for-apf-563122944.html?x=0&.v=8 ). 

Nearly 16 million people can't find jobs even though we are constantly being told that the worst recession since the Great Depression has officially ended. Yet instead of trying to revive the productive economy, most of the Obama Administration’s recover efforts still remain focused on cardio-shock treatment for Wall Street. Additionally, the President still seems curiously hamstrung by his Herbert Hoover-like devotion to fiscal rectitude: he wants to spend without “adding one dime to the budget deficit”, as he announced at his Congressional address on health care in September, even though deficits are a natural consequence of slowing economic growth, falling tax revenues and higher social welfare payments. 

To all of the chicken-littles (including the President) who fret about “excessive” government spending, we would simply point out that it is far better to deploy government spending in a way which REDUCES unemployment, rather than arises as a consequence of it.  We therefore suggest a new approach:

Government as Employer of Last Resort (ELR) or a Job Guarantee program.

The U.S. Government can proceed directly to zero unemployment by hiring all of the labor that cannot find private sector employment.  Furthermore, by fixing the wage paid under this JG program at a level that does not disrupt existing labor markets, i.e., a wage level close to the existing minimum wage, substantive price stability can be expected. Other benefits could be provided, including vacation and sick leave, and contributions to Social Security and, most importantly, health care benefits, providing scope for a bottom up reform of the current patchwork health care system.

Government as employer of last resort would not be introducing another element of intrusive bureaucracy into our economy, but simply better utilizing the existing stock of unemployed, now dependent on the public purse – especially the chronically long term unemployed. The current system we have relies on unemployed labor and excess capacity to try to dampen wage and price increases; however, it pays unemployed labor for not working and allows that labor to depreciate and develop behaviors that act as a barrier to future private sector employment.  Social spending on the unemployed prevents aggregate demand from collapsing into a depression-like state, but little is done to enhance future growth and demand, which can be done via the JG by providing them with employment, greater education and higher skill levels.  

The JG program would allow for the elimination of many existing government welfare payments for anyone not specifically targeted for exemption, and would command greater political legitimacy, as society places a high value on work as the means through which individuals earn a livelihood. Minimum wage legislation would no longer be needed as it would be established via the JG. Labor would welcome the safety net of a guaranteed job, and business would recognize the benefit of a pool of available labor it could draw from at some spread to the government wage paid to JG employees. Additionally, the guaranteed public service job would be a counter- cyclical influence, automatically increasing government employment and spending as jobs were lost in the private sector, and decreasing government jobs and spending as the private sector expanded. It would therefore remain a permanent feature of our economy, in effect acting as a buffer stock to put a floor under unemployment, whilst maintaining price stability whereby government offers a fixed wage which does not “outbid” the private sector, but simply creates a stabilizing floor and thereby prevents deflation.

ELR is desired because a more or less free market system does not (and, perhaps, cannot) continuously generate true full employment.  No civilized nation should allow a large portion of its population to go without adequate food, clothing and shelter.  Best of all is that the program would be creating a stock of EMPLOYED people, rather than a buffered stock of unemployed, where social capital depletes rapidly, and several long-term social pathologies develop.  The current policies clearly are not working; it’s time to try something that can put as many Americans as possible into productive employment.

 

 

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Wednesday
March 18th,
2015

KRISTINA HOOPER talks FINANCIAL REPRESSION

Kristina Hooper

 

 

SPECIAL GUEST: KRISTINA HOOPER, CFP, CAIA, CIMA, ChFC Managing Director, US Investment Strategist, Head of US Capital Markets Research & Strategy. Kristina Hooper is a managing director, US Investment Strategist and Head of US Capital Markets Research & Strategy with Allianz Global Investors, which she joined in 1998. She provides financial professionals and their clients with updates on financial-market performance, market trends, economic trends and financial-planning concepts. Ms. Hooper has appeared on CNBC and Reuters TV and is regularly quoted in The Wall Street JournalInvestor’s Business DailyReuters and other financial-news publications. She has 18 years of investment-industry experience and previously worked in product management at UBS (formerly PaineWebber) and at MetLife. Ms. Hooper has a B.A., cum laude, from Wellesley College; a J.D. from Pace University School of Law, where she was a Trustees’ Merit Scholar; and an M.B.A. in finance from New York University’s Leonard N. Stern School of Business, where she was a Teaching Fellow in macroeconomics and organizational behavior. Ms. Hooper holds the Certified Financial Planner, Chartered Alternative Investment Analyst, Certified Investment Management Analyst and Chartered Financial Consultant designations. She is a CFA Level II candidate.


FINANCIAL REPRESSION

What is financial repression?

Government actions (lower interest rates, increased regulations, etc.) to reduce debt while maintaining inflation

Goal: Create negative real (after-inflation) returns and inflate away public debt by forcing real rates below GDP growth

Why does it matter to investors?

It’s a “stealth tax” that systematically strips wealth; “safe” investments no longer generate enough income

It rewards debtors and punishes savers—especially retirees

Financial repression: It’s happening now around the globe

A Financial Repression checklist:

  • Extremely low key interest rates and bond yields
  • Central bank purchases of government bonds
  • Political pressure on banks to purchase government bonds
  • Nationalization of select banks
  • Repression-friendly regulatory measures
  • Restrictions on foreign capital movements
  • Pension asset transfers to governments

 

 

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Tuesday
March 17th,
2015

DOUG NOLAND talks FINANCIAL REPRESSION

Doug Nolan

 

 

SPECIAL GUEST: DOUGLAS C.NOLAND , Former Vice President, Federated Income Securities Trust and serves as senior portfolio manager of Federated Prudent Bear Fund, Federated Prudent DollarBear Fund and Federated Market Opportunity Fund. Before joining Federated, Doug was employed with David Tice & Associates, Inc. where he served as an assistant portfolio manager and strategist of Prudent B F Bear Fund and Prudent Global Income Fund. He earned a bachelor’s degree in accounting and finance from the University of Oregon and a master’s of business administration from Indiana University.

 

FINANCIAL REPRESSION

"Financial Repression is fundamental to current policy to try and sustain a global credit bubble... Policies have become ever more desperate as the credit bubble has gone global! It is a matter of policy makers distorting the incentives, especially the financial incentives. It is particularly painful for savers. Policy makers want to drive money out of savers into risk markets by creating incentives for speculation and leveraging to reflate the system and generate significant credit growth."

"It is flawed economic doctrine, flawed policy making and goes back a long way."

  • After the 1987 Stock Market Crash the Greenspan Fed flooded the market with liquidity,
  • We then had the late 80's excesses and that bubble burst,
  • In the early 90;s the Greenspan Fed came in and aggressively slashed interest rates and created a steep yield curve so the banks could borrow cheap and lend dear,
  • It created leveraged speculation,
  • We have been in serial bubbles ever since then. Each gets bigger and each post reflationary effort is even more extraordinary.
  • The 'Once in 100 Year Flood' was not the 2008 Crisis. We are in an even bigger bubble now. It is a Global Bubble. It is at the heart of money and credit. When the next crisis occurs the policies of Financial Repression won't have much of an impact unfortunately.

THE MARKET BASED CREDIT SYSTEM

"Back in the 1990's I was obsessed with trying to understand how an impaired banking system from the early 1990's morphed into this new age financial system that was fueling historic prosperity and a bull market. By the late 1990's I was convinced we had fundamentally changed finance. That uniquely for the first time in history we had global credit that was unconstrained. The quality and quantity of credit was unrestrained. There was no gold standard, there was no Bretton Woods Monetary regime, there was not even any ad hoc. dollar reserve system to restrain credit. Unlike historically when credit was dominated by bank lending, this new credit that developed in the 1990's was market based - securitization, Fannie Mae, Freddie Mac, Derivatives, Wall Street Finance. I was convinced that credit which is unstable would see this new credit highly unstable."

"I believed the government would reign this credit in. I had no inkling that the government would accommodate this type of credit and use this type of credit for reflationary policy. That is really how it got away from them! Accommodating financial leveraging and speculation etc."

WE HAVE DISREGARDED THE VULNERABILITIES OF CAPITALISM

"I am very much a free market person. I want the market to dictate price. As much as possible I want the government out of it. I look at the Financial Sphere and Economic Sphere. The Financial Sphere needs to be carefully regulated. You cannot have unconstrained credit! You cannot have a Financial Sphere that inflates at a whim because that distorts the pricing mechanism."

"I fear that when the crisis collapses the system it is going to be folks like us and our listeners who will have defend Capitalism by saying:

"Capitalism wasn't to blame. It was a run away Financial Sphere and poor Policy making in managing money & credit that was the culprit!"

Capitalism is not flawed but instead has vulnerabilities. We cannot disregard these vulnerabilities. These vulnerabilities are in Credit. We have disregarded the vulnerabilities within Capitalism. We have not separated the real economy pricing mechanism which operates very differently in the Financial Sphere.

This extensive discussion covers a wide range of subjects including:

  • THE BUILD-UP OF SYSTEMIC RISK
  • A CRISIS OF CONFIDENCE IS AHEAD
  • WHY WE HAVE RECORD ARTIFICIAL HOUSEHOLD WEALTH
  • FINANCIAL FRAGILITY - As long as Credit is expanding things looks good. But it camouflages the underlying financial fragility.
  • 2008 WAS ABOUT PRIVATE CREDIT - THE NEXT CRISIS WILL BE ABOUT PUBLIC CREDIT
  • THE GLOBAL BUBBLE HAS NOW BEEN PIERCED

"You can now expect the unexpected from Policy Makers"

 

 

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Sunday
March 15th,
2015

PETER BOOCKVAR talks FINANCIAL REPRESSION

Peter Boockvar

 

 

SPECIAL GUEST: PETER BOOCKVAR Managing Director, Chief Market Analyst with The Lindsey Group, a macro economic and market research firm. Prior to joining The Lindsey Group, Peter spent a brief time at Omega Advisors, a New York based hedge fund, as a macro analyst and portfolio manager. Before this, he was a partner at Miller Tabak & Co for 18 years where he was recently the equity strategist and a portfolio manager with Miller Tabak Advisors. He joined Donaldson, Lufkin and Jenrette in 1992 in their corporate bond research department as a junior analyst. He is also president of OCLI, LLC and OCLI2, LLC, farmland real estate investment funds. He is a CNBC contributor and appears regularly on their network. Peter graduated Magna Cum Laude with a B.B.A. in Finance from George Washington University.


FINANCIAL REPRESSION

"Financial Repression is the artificial suppression of interest rates well below the rate of inflation and well below what they would be otherwise if set by the supply and demand for money. That is what should determine what the cost of money is!"

SUPPLY & DEMAND CONSEQUENCES

"The central banks are pressuring you to act today in some activity that you would otherwise have done tomorrow. They want you to buy a car today, they want you to buy a house today, they want you to buy that stock today - not tomorrow. It just pulls demand activity forward! When this begins activity in the short term accelerates both in terms of both economic activity and higher asset prices. At some point you reach a wall where you have pulled forward so much activity that you have reached the law of diminishing returns!"

"All of this has pulled forward future returns on asset prices, but that doesn't stop asset prices from going higher! ... "You get short term benefits but at the expense of long term costs. You pay for it over the long term."... "What the central bankers actually end up creating is Deflation because of the excess capacity build-up to match the artificially created demand!"

We have Deflation presently in Commodity prices but in the US we have Inflation in Professional Services.

"Central Bankers have 'mucked' up the entire concept of Supply & Demand and price discovery. All the various inputs are 'out of whack relative to where they would be historically!"

POTENTIAL FED RATE INCREASES

"This ends when Inflation actually starts to increase! When Interest Rates do start to rise and in affect take away the printing press of the central bankers. Right now Central Bankers have given themselves license to do what they want because at these low levels of inflation, but at some point the bond market is not going to be so accommodating!"

The Central Bankers are trapped in a policy they can't get out of. It is ridiculous that after 6 years of ZIRP everyone is 'freaking out' over a mere 25 basis point increase.

The Fed's academic econometric models are flashing red over labor market metrics. Therefore they will increase rates in June irrelevant of whether that is actually the right thing to do (assuming you believe the Labor numbers) . That is what guides them.

"The issue is not whether the Fed raises rates but rather the turbulence it causes and what it means to potential future rate hikes."

A MAJOR CORRECTION IS POTENTIALLY JUST BEGINNING

The combined Fed tightening and a changed earnings picture suggest the basis for rising equity markets is no longer there. The Multiple expansion game is not there.

"How far we decline I am not sure. I am not sure where the Yellen 'Put' is. It is an 'out of the money' Put but I am not sure what the strike price is! I don't know if it is 15% or 25% lower. I am pretty sure if we are down 20-25% Yellen will cut rates below where she has them after raising them in June. I would then not be surprised to see another round of QE."

AT SOME POINT THE FED WILL LOSE CONTROL

"We know the Fed lost control of commodity prices. The Fed is trying to generate inflation and commodity prices have gone the exact opposite way! At some point they are also going to lose control of stock prices."

"ECB QE was the final act of Central Bank Largesse!"

"There is literally Monetary Madness Going On!"

 

 

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Monday
March 9th,
2015

WHAT DO THE TRENDS SUGGEST?

 

Charles Hugh Smith

 

 

Regular Co-Host: CHARLES HUGH SMITH , Author & Publisher of OfTwoMinds.com

OPEN ACCESS

with Charles Hugh Smith & Gordon T Long

33 Minutes - 15 Slides

Charles Hugh Smith and Gordon T Long discuss some of the major secular trends occurring today and give their views on what they may be telling us about what might be ahead.

TECTONIC FORCES

  • Private Sector rapidly decentralizing and networking decision making,
  • Public Sector rapidly centralizing and taking more control through laws, regulations, fees, licenses and taxes.

5 TRENDS TO CONSIDER

TECHNOLOGY PRESSURES

 

GROWING DISRUPTIVE PRESSURES TO A FRAGILE SYSTEM

DISRUPTION:

  • Strengthens Robust, Decentralized Systems,
  • Breaks Fragile, Centralized Systems.

 

DESTABILIZING FORCES AT PLAY IN A FRAGILE ECONOMIC ENVIRONMENT!

 

 

 

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Sunday
March 8th,
2015

AMIN RAJAN talks INVESTING IN A DEBT-FUELLED WORLD

Amin Rajan

 

 

SPECIAL GUEST: PROF. AMIN RAJAN Chief Executive of CREATE (Centre for Research and Technology in Europe)-Research – A network of prominent researchers undertaking high level advisory assignments for governments, global banks, fund managers, multinational companies and international bodies such as the EU, OECD and ILO. He is a visiting professor at the Centre for Leadership Studies at Exeter University, and an associate fellow at Oxford University’s Said Business School. He is an expert on employment and workforce diversity and is one of the most sought after speakers on the future of work, organization and society and its leadership implications.

Prof Rajan has also acted as a senior consultant to companies such as ABN-AMRO, Aegon Group, Barclays, BlackRock, BP, BT, Citibank, Credit Suisse, Deutsche Bank, EDS, Fiat, Ford, GSK, HSBC, IBM, ING Bank, JPMorgan Asset management, Legal & General plc, Lloyds Bank, Microsoft, Morgan Stanley, Motorola, Principal Global investors, RBC Dexia, Royal Bank of Scotland, Prudential, Rolls Royce, Royal SunAlliance, T.Rowe Price, Shell, Storehouse Group and UBS.

FINANCIAL REPRESSION

"Financial Repression is a device used by governments to liquidate their debt."

Financial Repression uses low interest rates (which reduces their financing costs) and inflation (which vaporizes its debt). The Negative Real Interest Rates which the two in combination create, has in the modern era been the way governments reduced their debt burdens.

"Financial Repression brings about an arbitrary redistribution of wealth."

Today it is the governments only politically realistic option.

The critical problem is holders of fixed income debt get hurt where there is a redistribution of wealth:

  1. From Savers to Borrowers.
  2. From Pension Plans to Governments

EXPECTED DURATION

Historically we should expect Financial Repression to last anywhere from 15 to 50 Years. We are now into only the seventh year! In Prof Rajan's opinion "this show has a long shelf life and likely to run another 5 - 10 years"

 Download Report

PENSION PLANS - Entering "De-Accumulation Stage"

Aging demographics in the debt burdened developed economies is exaggerating the effects of Financial Repression because of the need for Investment Income products by retirees.

Pension Plans are now going into the "De-Accumulation Stage" where there is more money going out of the plan than is going in. Pension plans face problems of both under contribution levels and De-accumulation resulting in serious underfunding positions.

THE RETIREMENT TSUNAMI

The "Baby Boomer' Generation is in the process of retiring. There will be 78 Million in the US and 84 Million. Europe which accounts for 8% of the global population and 25% of global output accounts for a massive 48% of global welfare budgets.

The shift from Defined Benefits (DB) to Defined Contributions (DC) is about the "Personalization of Risk" so we are told, "so people can be 'empowered' and will be less dependent on their employers plans". Instead Prof Rajan argues we have "Personalization of risk has a big downside. It transfers risk from those who couldn’t manage it to those who don’t understand it!"

SOLUTIONS ALPHA

Product alpha is about beating the markets, solutions alpha is however about meeting investors’ predefined needs.

"Solutions Alpha is not about trying to beat the market nor the crowd, because these markets are going to end in tears at some stage. So when thinking about retirement think about exactly what your needs are then think about asset classes that will help you meet these needs. 'Shoot-The-Lights-Out' returns are no longer an option without huge amounts of risk!"

Solutions alpha will remain the epicenter of innovation. Solutions Alpha requires looking for asset classes that deliver:

  1. Regular Income,
  2. Inflation Protection,
  3. Low Volatility.

Examples would be Rental Real Estate, Infrastructure, Timber, Farm Land and many traditional "hard assets".

LIQUIDITY CRISIS - Volcker Rule Has it 'Preordained'

When the next market correction occurs "liquidity is going to dry up in no time at all because of the Volcker Rule. The inventories of Bonds which the Investment Banks are caring are now one-eight of what they were pre-2008. Any mass exit and there will be no liquidity and prices will drop like a stone!"

OBSERVATION

Prof. Amin Rajan observes that two paradigm changes have occurred in capitalism:

  1. Capitalism has Lost Social Expression - It is no Longer Improving and Benefiting Society as a Whole
  2. Over Financialization - Financial Engineering and Trading for Profits had taken control of Capitalism versus Investing In Productive Assets for increasing productivity. Markets no longer channel capital from savers to investments in productive assets. There are neither savers nor productive assets involved in the process but rather financialization.

 

 

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Monday
March 1st,
2015

MEB FABER talks GLOBAL VALUE

 

Mebane Faber

 

 

SPECIAL GUEST: MEBANE T. FABERChief Investment Officer and Portfolio Manager

Mr. Faber is a co-founder and the Chief Investment Officer of Cambria Investment Management.  Faber is the manager of Cambria’s ETFs, separate accounts and private investment funds for accredited investors.  Mr. Faber has authored numerous white papers and three books: Shareholder Yield, The Ivy Portfolio, and Global Value.   He is a frequent speaker and writer on investment strategies and has been featured in Barron’sThe New York Times, and The New Yorker. Mr. Faber graduated from the University of Virginia with a double major in Engineering Science and Biology.

FINANCIAL REPRESSION

"An environment where interest raters are lower than inflation and you have a low or even negative interest rate environment which helps someone and hurts someone else. It hurts savers but is good for borrowers and people who have a lot of debt. The inflation eats away at that debt. It helps someone like the US government"

"Stocks and bonds like high real interest rates. They typically don't like low or negative real interest rates". Other asset classes like gold like negative real rates and have over the last decade, but not so much over the last couple of years."

VALUE & MOMENTUM

Faber likes both value and momentum and believes they can work together as part of a global portfolio, particularly where they intersect. Cambria uses Shiller's 10 Year CAPE benchmark to look at equities. It is typically around 17 and is now around 27 in the US. It presently shows a lot of great valuations around the world however momentum has been in US stocks, bonds and real estate. "Right now we see a lot of opportunity, but particularly abroad".

THE "HOME COUNTRY" BIAS

The US is only about 50% of global market cap but most US investors have a 'hometown bias" of having 70% of their portfolio in US securities. Faber has found that it consistently ranges from as low as 65 to as high as 85%. Meanwhile, when considered on a GDP basis the US is only about a fifth to 25% and on a valuation basis is the third most expensive. This would suggest the US has a headwind, especially after a six year run. An exposure of at least half to foreign investment seems more reasonable to Meb Faber.

DEVELOPED AND EMERGING COUNTRIES

We start with a universe of about 45 countries with reasonable liquidity. One of Cambria's funds buys the eleven cheapest countries in the world. Faber's analysis suggests avoiding countries that create large bubbles can be a critically important when viewed over the longer term because of the size of the inevitable corrections."

"One of the emotional challenges and why value works is because it is hard to do."

CLASSIC MISTAKES

  1. "Not Getting Out of Your Own Way!"
    • Getting Caught Up In Performance,
    • Not Having a Plan,
    • Trying to Time Your Investments,
    • Realistic Expectations.
  2. "Not Paying Attention to Fees"
  3. "Too Wedded to An Investment Style"
    • Need to be Asset Class Agnostic

 

 

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Monday
February 23rd
2015

First ZIRP, Now NIRP!

A Destabilizing Policy

John Rubino

 

SPECIAL GUEST HOST: JOHN RUBINO, Author & Publisher of DollarCollapse.com

OPEN ACCESS

 

First ZIRP, Now NIRP!

A Destabilizing Policy

Published 02-23-15

32 Minutes

What is the significance of the dramatic shift from ZIRP (Zero Interest Rate Policy) to NIRP (Negative Interest Rate Policy)?

This is a startling development that changes the investment landscape, strategies and business models of many traditional industries. We have watched rapid developments in Europe unfold with:

NIRP from the Central Banks  of:

  • ECB,
  • Switzerland,
  • Denmark
  • Sweden.

We have NIR Bonds from :

  • Germany's BMW,
  • France's LVMH,
  • Britain's BP,
  • Swiss Nestle

 

When money becomes less than free and you get paid interest to borrow all sorts of distortions begin to happen.

STOCK BUYBACKS

Negative interest rates are inviting companies to be "PAID TO BORROW MONEY" and then use the proceeds to buyback their shares, boost eranings per share and reduce dividend payments.

It has fostered an explosion in stock buybacks

FRACTURED BUSINESS MODELS

The question on the table that few can answer is: How do these industries survive with negative rates?

  • Pension Plans,
  • Insurance Plans,
  • Money Funds,
  • Retirement Plans

Industries which have been considered to be the safest places to place money are now being forced into becoming quasi hedge funds to achieve yield. This is a towering change in the world.

If because of this, any one of the participants in any one these industries were to 'blow up' it would add greatly to the already skeptical mistrust of investors.

It is highly likely to trigger a' risk-off' shift 'in a heart beat which would impact credit flows and liquidity! The same thing that happened in 2008.

WITH LOW INTEREST RATES NOT WORKING - DID THE CENTRAL BANKS FINALLY LOSE CONTROL?

 

 

 

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Sunday
February 22nd,
2015

Dr. PAUL CRAIG ROBERTS talks FINANCIAL REPRESSION

Dr. Paul Roberts

 

 

SPECIAL GUEST : Paul Craig Roberts Ph.D. Paul Craig Roberts has had careers in scholarship and academia, journalism, public service, and business. President Reagan appointed Dr. Roberts Assistant Secretary of the Treasury for Economic Policy and he was confirmed in office by the U.S. Senate. From 1975 to 1978, Dr. Roberts served on the congressional staff where he drafted the Kemp-Roth bill and played a leading role in developing bipartisan support for a supply-side economic policy. After leaving the Treasury, he served as a consultant to the U.S. Department of Defense and the U.S. Department of Commerce.

Dr. Roberts has held academic appointments at Virginia Tech, Tulane University, University of New Mexico, Stanford University where he was Senior Research Fellow in the Hoover Institution, George Mason University where he had a joint appointment as professor of economics and professor of business administration, and Georgetown University where he held the William E. Simon Chair in Political Economy in the Center for Strategic and International Studies. 

 

Published 02-22-15

31 Minutes

Dr. Paul Craig Roberts is extremely meticulous in examining the central problems facing America and the developed economies today. You may not like nor agree with what he says but there is little double as a former high level Treasury official, academic professor and Wall Street Journal editor, that he knows what he is talking about.

FINANCIAL REPRESSION

"It is going on on several fronts conducted by different people for their own agendas, though they all seem to be mutually supporting.

  1. FINANCIALIZATION OF THE ECONOMY by the Big Banks. - "What that means is that they are converting the entirety of the economic surplus to paying interest on debt. They are draining the economy of all vitality! There is nothing left for the expansion of consumer demand, business investment and old age pensions. It expropriates the economic surplus that is created beyond the maintenance of the current living standard into interest on debt."
  2. OFF-SHORING OF MIDDLE CLASS JOBS by Corporations & Wall Street - "What the Corporations and Wall Street have achieved by off-shoring manufacturing jobs and tradable professional job skills such as software engineering & information technology. What they have done by moving these offshore is to recreate the labor market conditions and wage exploitation of the late 19th century."
  3. MANIPULATION OF THE BULLION MARKETS by the Futures Market Bullion Banks - "There is no free market in the futures markets. These are markets that are manipulated."

COLLUSION BETWEEN PARTICIPANTS

"I think there is a lot of collusion. For example the government colluded with the banking system in financial deregulation. For example they repealed Glass-Steagall. They expressed this absurd claim that financial markets are self regulating."

"They turned the financial system into a gambling casino where the bets are covered by the tax payer and central bank."

The cancer which started in the US Financial System has spread globally. The carriers of the cancer has been the International Banks.

WASHINGTON ANSWERS TO WALL STREET

"Some of the Financial Repression is collusion of government serving the financial interests because Wall Street is a huge supplier of political campaign funds which you are highly dependent on to get re-elected. So you answer to the donors. You don't answer to the public interest. It doesn't give you any money."

"You answer to:

  • Wall Street,
  • The Military-Security Complex,
  • The Agri Business like Monsanto,
  • The extractive Industries (Oil, Timber, Mining)

These are the powerful interest groups that use the government to serve their interests."

THERE ARE NO LONGER COUNTERVAILING POWERS IN WASHINGTON

With the destruction of the manufacturing jobs in America through off-shoring, it has reduced the power of the unions and destroyed the Democrats independent source of campaign funds.

"You now have two parties with the same head and reporting to the same masters. There is no longer any countervailing power"

You no longer have the Democrats supporting workers against the Republicans supporting business. Both parties represent them.

"This is the reason you can't do anything about Financial Repression!"

NEO-CONSERVATIVE CONTROL OF FOREIGN POLICY - $6T TRILLION IN WAR DEBT

We have been in 14 years of wars and added $6T of national debt to finance these wars "without adding five cents of investment for the country having taken place."

"We now have the Neo-Conservatives driving the conflict with Russia (which is insane), with China (which is insane). The United States doesn't have the power to try and dominate Russia / China. Especially now that the two countries have a strategic alliance"

"You have much of the world turning away from the United States because of Washington's

  • Abuse of the Dollar as the World's Reserve Currency,
  • Abuse of the dollar based payment system,
  • Imposing unilateral sanctions which are acts of war,
  • Threatening people with expulsion from the clearance mechanism and people saying we won't have any part of this,
  • The BRIICS establishing their own version of the IMF,
  • The Impact of the Spy Scandals and people saying they will build their own internet,

All of this is not only going to effect business it is going to effect American power. It is going to start shriveling!"

"If you have these crazed Neo-Conservatives demanding control of the world, faced with declining power, you don't know what they will do! It is a very, very dangerous situation. I'm surprised it has taken the world so long to realize the threat the US poses to the rest of the world."

"The US Dollar payment system is essentially a system for looting. This, Globalization and Neo-liberal economics are tools of American economic imperialism. Countries are beginning to realize this. The looting of countries by American imperialism has now reached the point where it is turning on itself - Greece for example."

 

 

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Saturday
February 21st,
2015

What is FATCA?

 

Haydon Perryman

 

 

SPECIAL GUEST: Haydon Perryman CGMA is an experienced FATCA Programme Manager, has mobilized three FATCA Programmes from scratch, including those of Lloyds Banking Group and the Investment Banking Arm of RBS. Haydon has been working on FATCA for four years. Haydon has a detailed understanding of the FATCA regulations and the practical strategies involved in ensuring an FFI meets the requirements of FATCA at an agreed level. Haydon has a wealth of industry contacts on FATCA in Banking, the Big Four and amongst Tax and Legal Advisors. Haydon’s FATCA experience spans Investment Banking, Corporate Banking and Retail Banking.

"This a modern day "Doomsday" Book, the same as William the Conqueror Implemented in 1066 after conquering England. He needed to know where the wealth was so he could tax it"

"This is Not Really About Tax There are Easier Ways to Solve Tax Tracking - Its about a Common Reporting Standard. Its about the ability to track Capital"

"FATCA is a decoy for the Common Reporting Standard"

"There is an incredibly aggressive urgency of implementation - an unprecedentedly quick agreement between 57 governments"

 

Why?

Either to Tax it , Expropriation it or Control Its Free Movement

 

"Era of Banking Secrecy is Over!"

"A Complete Misunderstanding by Banks"

NEW ACRONYMS IN THE ERA OF FINANCIAL REPRESSION

  • FATCA - Foreign Accounts Tax Compliance Act
  • GATCA - Global Account Tax Compliance "Acts"
  • CRS - Common Reporting Standard
  • IGAs - Inter Governmental Agreements on FATCA
  • AEOI - OECD's Automatic Exchange of Information
  • AML/KYC Procedures - The term “AML/KYC Procedures” means the customer due diligence procedures of a Reporting Financial Institution pursuant to the anti-money laundering or similar requirements to which such Reporting Financial Institution is subject.

THE ROAD AHEAD: FATCA, IGAS AND THE CRS

The costs of FATCA Compliance will be USD 1 to 2 trillion worldwide. The bulk of these costs will be incurred in the customer outreach required to obtain the required documentation.

There will also be considerable customer backlash to FATCA and the documentation it requires. In the age of social media this matters, if this sounds like hyperbole please have a look at this URL

At a most basic level FATCA, the IGAs and the CRS are about making tax part of standard KYC/AML procedures and then reporting, for tax purposes, to those jurisdictions, in which the account holder has tax residence or citizenship.

EVERYTHING YOU NEED TO KNOW ABOUT GATCA / FATCA

DOWNLOAD THE 525 PAGE REPORT

 

 

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Thursday
February 19th,
2015

Dr. MARC FABER talks FINANCIAL REPRESSION

Dr. Marc Faber

 

 

SPECIAL GUEST : Marc Faber, Ph.D. Editor and Publisher of “The Gloom, Boom & Doom Report” and website:  www.gloomboomdoom.com

Dr Marc Faber feels strongly that the current money printing policies "will not end well"!

He feels that:

"Governments are not smart enough to have thought the current scheme out. The professors, academics (who have never worked a day in their lives in the private sector) and central banks think by having artificially low interest rates you can solve problems. Actually, they aggravate the problems!"

"When central banks print money nothing begins to make sense!" -- "It is no longer a free market. Markets are now manipulated by governments and notably by their agents, the central bankers." 

FINANCIAL REPRESSION - An "Expropriation"

"Basically what central banks have done around the world is to push interest rates to extremely low or even negative rates. I don't call it a repression. I call it an expropriation of the savers because before the intervention of the banks occurred post 2008, a saver got a decent rate of interest. Now they get nothing at all! So either they speculate or they lose purchasing power over time!"

The purchasing power of money is depreciating. Financial Repression or what Dr Faber calls "expropriation", he feels is very negative for the middle and working class.

The current government and central bank policies "are leading to huge asset bubbles in stock, real estate, commodities, collectibles, art and so forth." Inflation and Deflation work much the same way according to Marc Faber. All prices do no go up or nor decline at the same time.

"We had the collapse of the Nasdaq after March 2000. Then the Fed created the housing bubble and after it collapsed after 2007, it had a devastating impact on a very large number of households. Then in 2008 we had a commodities bubble with oil going to $147/bl and now you know where oil is trading at. Its now 1/3 of what it was at that time basically. The Money printing leads to bubbles which they deflate and hurt the majority at the expense of a few people. This is not going to help the economy in the long run - PERIOD!"

PENSION AND INSURANCE "MODELS" - In Serious Trouble

The pension plans and Insurance industry is in deep trouble. They are basically forced to speculate on something. That speculation will end very badly!

WHAT SHOULD INVESTORS DO?

Dr Faber says quite honestly,

"I am an economist, strategist and investor. The answer to the question of what should an investor do is - I DO NOT KNOW! But people expect me to know so I can tell you what I would do. In the absence of knowing precisely how the end game will be played we should invest in a diversified portfolio of different assets. Some in real estate, some in equities, some in cash & bonds, and some in precious metals."

"For an investor to not own some precious metals at this point is almost irresponsible!"

MORE QE IS COMING

"I don't believe we have currency wars but rather the central bankers, one after the other, prints in a 'round about'"

"Money printing has never ended well in history. It can postpone the problems, but it will make the end result even worse."

"I believe the Fed will intervene at some point with another round of QE!"

 

 

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Saturday
February 14th,
2015

LAURENCE KOTLIKOFF talks BANKING & THE "FISCAL GAP"

Laurence Kotlikoff

 

 

SPECIAL GUEST : Professor Laurence Kotlikoff, Ph.D. is a William Warren FairField Professor at Boston University, a Professor of Economics at Boston University, a Fellow of the American Academy of Arts and Sciences, a Research Associate of the National Bureau of Economic Research, a Fellow of the Econometric Society, a former Senior Economist, and on President Reagan's Council of Economic Advisers.

Professor Laurence Kotlikoff believes the current banking system needs to be restructured into "Limited Purpose Banking to remove excess leverage and opacity; that the bureaucrats are having a field day with new ineffective regulations and the US government is financially bankrupt when accounted for correctly.

FINANCIAL REPRESSION

To Professor Kotlikoff the Financial System needs to be understood as a Public Good. It is a market place which needs coordination and banks & financial intermediaries are there to facilitate the operation and management of that public good. Regulators are there to keep the public good working. The question is what kind of regulation do we need that will ensure the financial system keeps working.

"Today the system is in bigger danger than 2008 because fundamentally the banks are being allowed to operate with dramatically larger leverage than would keep things safe!"

Additionally, the banks are being allowed to operate with full opacity. They don't have to tell what they own in terms of assets or liabilities. Therefore depositors don't know the risk they are taking which can lead to bank runs which we saw in 2008 where banks didn't trust other banks.

"We are all set up to see this happen again because of all this leverage and opacity. The system is more fragile!"

THE FIX

In his book "Jimmy Stewart is Dead", Professor Kotlikoff talked about shifting from a "Faith Based" banking system to a "Show Me!" banking system where financial intermediaries disclose all the assets they are holding. Instead of borrowing money to invest in assets we can't see, they would sell shares through equity finance. They in effect would be equity financed Mutual Funds.

The purpose of "Limited Purpose Banking" which Professor Kotlikoff is proposing in his book is that all the financial middle men who are running the "public good" not be allowed to gamble with it. To most people their banking would be through:

  • Cash Mutual Funds - For the Payment System
  • Mortgage Mutual Funds - Instead of Fannie Freddie

The leveraged derivative element of the current speculative banking system would be run in a similar manner to modern parimutuel betting system polls. Dodd-Frank legislation has not made the system safer and instead sees only one regulator agency (the "Federal Financial Authority") which oversees disclosures versus 130 entities in Dodd-Frank!

THE $210 TRILLION FISCAL GAP

Economists like Professor Kotlikoff feel the 'Fiscal Gap' is what we should be measuring, not one part of it which is the National Debt. The Fiscal Gap according to the CBO is presently $210T while the National Debt approximates $13T. We are focused on the $13T but really we need to be focused on is the $210T.

Over 1200 economists and 17 Nobel Laureates have endorsed a bill that mandates that the CBO & GAO do 'Fiscal Gap' reporting to look at the big picture.. Information on this bill can be found at www.theinformact.org.

The current shortfall is 10.5% of GDP, each and every year. To offset this would require a 60% increase in taxes or for a 35% cut of all expenditures and benefits.

"The US is actually fiscally broke!"

The banks are holding a lot of the governments debt which is unpayable. Governments that cannot pay their bills print money. Eventually this inevitably leads to inflation. This will make the bonds worth less money which would highly likely put the banking system underwater.

SUPPORT

theinformact.org

thepurpleplans.org

 

 

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Thursday
February 12th,
2015

LACY HUNT talks DEBT DEFLATION

Lacy Hunt

 

 

SPECIAL GUEST : Lacy H. Hunt, Ph.D. is an internationally known economist, is Executive Vice President of Hoisington Investment Management Company, a firm that manages over $5 billion for pension funds, endowments, insurance companies and others.

Lacy Hunt is the author of two books, and numerous articles in leading magazines, periodicals and scholarly journals.  Included among the publishers of his articles are. Barron’sThe Wall Street JournalThe New York TimesThe Christian Science Monitor, the Journal of Finance, the Financial Analysts  Journal of Portfolio Management.

Previously, he was Chief U.S. Economist for the HSBC Group, one of the world’s largest banks, Executive Vice President and Chief Economist at Fidelity Bank and Vice President for Monetary Economics at Chase Econometrics Associates, Inc.  A native of Texas, Dr. Hunt has served as Senior Economist for the Federal Reserve Bank of Dallas. 

OPEN ACCESS

40 Minutes

Lacy Hunt and his partner Van Hoisington were called "The Henry Fords of bond investing" by Forbes Magazine. You can understand why when you listen to Dr Lacy Hunt describe the current global macro environment.

FINANCIAL REPRESSION

"A superficial attempt to deal with the excessive indebtedness that grips the global economy .. and in my opinion will not work!"

"Monetary Policy is not the solution here. There are Fiscal Policy solutions but they require shared sacrifice, strong leadership (something we don't have in the US or Europe - no one has) ... basically what w are trying to do is to solve an extremely over-indebted situation domestically and globally by taking on more debt and aggravating the problem "

DEFLATION

“The current economic maladies and continuing downshift of economic activity has been the over-accumulation of debt. In many cases

"Debt funded the purchase of consumable and non-productive assets, which failed to create a future stream of revenue to repay the debt.”

“The increase since 2008 has been primarily in emerging economies. Since Debt is the acceleration of current spending in lieu of future spending.”

CURRENCY MANIPULATION

    1. Impairs global activity,
    2. Spurs dis-inflationary or deflationary trends and
    3. Engenders instability in world financial markets.

THE CURRENCY WARS OF THE 1920’S & 1930’S

Lacy muses on the effects of debt and takes us back to the ’20s and ’30s, when there were similar problems with debt in countries that had engaged in currency wars for over a decade.

Clearly the policies of yesteryear and the present are forms of “beggar-my-neighbor” policies, which the MIT Dictionary of Modern Economics explains as follows: “Economic measures taken by one country to improve its domestic economic conditions … have adverse effects on other economies. A country may increase domestic employment by increasing exports or reducing imports by … devaluing its currency or applying tariffs, quotas, or export subsidies. The benefit which it attains is at the expense of some other country which experiences lower exports or increased imports.… Such a country may then be forced to retaliate by a similar type of measure.”

The existence of over-indebtedness, and its resulting restraint on growth and inflation, has forced governments today, as in the past, to attempt to escape these poor economic conditions by spurring their exports or taking market share from other economies. As shown above, it is a fruitless exercise with harmful side effects.

It behooves us to pay attention to Lacy since he has been one of the most accurate forecasters of interest rates for the last 20 to 30 years.

2015 -Parallels to that earlier period.

  • First, there is a global problem with debt and slow growth, and no country is immune.
  • Second, the economic problems now, like then, are more serious and are more apparent outside the United States. However, due to negative income and price effects on our trade balance, foreign problems are transmitting into the U.S. and interacting with underlying structural problems.
  • Third, over- indebtedness is rampant today as it was in the 1920s and 1930s.
  • Fourth, competitive currency devaluations are taking place today as they did in the earlier period. These are a combination of monetary and/or fiscal policy actions and also, with floating exchange rates, a consequence of shifting assessments of private participants in the markets.

INTEREST RATES

“The downward pressure on global economic growth rates will remain in place in 2015. Therefore record low inflation and interest rates will continue to be made around the world in the new year, as governments utilize policies to spur growth at the expense of other regions.”

“new lows in yields in 2015 in the intermediate- and long-term maturities of U.S. Treasury securities”

 

 

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Monday
February 9th,
2015

THE NEXT "PEG" TO FALL

 

Charles Hugh Smith

 

 

Regular Co-Host: CHARLES HUGH SMITH , Author & Publisher of OfTwoMinds.com

OPEN ACCESS

with Charles Hugh Smith & Gordon T Long

35 Minutes - 20 Slides

Charles Hugh Smith and Gordon T Long discuss the Currency War pressures now on China to devalue the currency. Such an event could potentially send deflation shock waves around the globe and show how impotent and precarious central bank policy has truly become.

DOMINOES ARE FALLING!

  • First the Russian Ruble (December),
  • Second the Swiss Franc (January)
  • Third The Danish Krona (February)

WHAT'S NEXT - As A Result of the Dollar Bull?

  • The Singapore Dollar?
  • The Hong Kong Dollar?
  • The Yuan Devalues (Bands Expanded)??

 

 

HAVE CENTRAL BANKERS LOST CONTROL?

 

 

 

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Sunday
January 25th
2015

CHAOTIC TURMOIL: Its Actually Logical If You look Closely!

 

John Rubino

 

SPECIAL GUEST HOST: JOHN RUBINO, Author & Publisher of DollarCollapse.com

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CHAOTIC TURMOIL: Its Actually Logical

If You Look Closely!

Published 01-26-15

30 Minutes

John Rubino feels "the economic policy around the world is not sustainable. They only have one tool which is easy money which they must do more and more of it over time to maintain normality in the world. At some point they run out of the ability to create more currency and monetize more debt. The debt that is required becomes overwhelming and the system spins out of control We are seeing the early stages of that now with all sorts of crazy volatility springing up in places around the world where no one suspected."

"The Central Banks of the World are Beginning to lose control of the process!"

MAKING SENSE OF IT ALL

John tries to make sense of what appears to be unrelated chaotic events. He tackles the most recent four:

1)  ECB & Quantitative Easing Announcement

2)  SNB Abruptly Unpegging the Franc

3)  The Global Energy Shocker

4)  Gold's Sudden Movement

 

 

ECB & QUANTITATIVE EASING ANNOUNCEMENT

"The Eurozone is in danger of breaking apart and falling into deflation which is a disaster for an over indebted economy!"

SNB ABRUPTLY UNPEGGING THE FRANC

"Switzerland is a very small country but a very big story. This is the first central bank to opt-out of the currency war! Basically, they surrendered but it yet has to be determined if you can surrender in these currency wars?"

THE GLOBAL ENERGY PRICE SHOCKER

"The US employment gains associated with the Shale Oil boom are gong to be reversed out... as are the junk bonds which will be the 'sub-prime mortgages' of this bubble ... on balance the US is gong to be hurt more by falling oil prices"

GOLD'S SUDDEN MOVEMENT

"The point is coming where everyone figures this out and doesn't want to hold the currencies anymore. You are seeing this in the behavior of gold in the crisis economies .. Russia and Euros"

WHAT IS OCCURRING

A SHAKEN BELIEF IN THE OMNIPOTENCE OF THE CENTRAL BANKS BEING ALL POWERFUL AND THAT THEY CAN BE TRUSTED!

 

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Saturday
January 24th,
2015

CHARLES BIDERMAN talks FINANCIAL REPRESSION

Charles Biderman

 

 

SPECIAL GUEST : Charles Biderman is the Founder and Chief Executive Officer of TrimTabs Investment Research, Inc., an independent investment research firm based in Sausalito, CA that specializes in publishing detailed daily coverage of stock market liquidity. He is interviewed regularly on CNBC and Bloomberg TV and is quoted frequently in the financial media, including Barron's Magazine, the Wall Street Journal, Forbes, and Investor's Business Daily. He is the author ofTrimTabs Investing: Using Liquidity Theory to Beat the Stock Market (John Wiley & Sons, 2005). He holds a B.A. from Brooklyn College and an M.B.A. from Harvard Business School.

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30 Minutes

A seasoned professional, Charles Biderman points out that when you create money, you create debt. When that debt goes to front run demand you will face the problems we are now facing in the energy industry with supply or ghost cities in China. Zero interest rates has brought forward demand which is now resulting in commodity deflation. "There is now no relationship between the economy and the stock market because of zero interest rate policies!".

FINANCIAL REPRESSION

"The markets are rigged by the central bank policy of zero interest rates. To the extent the markets are rigged we don't have free markets. That would be Financial Repression!"

A 'NO GROWTH' WORLD

"We are in a no growth world. We have governments in the US, Europe,Japan and China that are anti-growth, anti-free market growth. On the other hand we have central banks that are committed to creating as much money as is necessary to keep stock markets as high as they can be even though we have a total disconnect between the economy and the markets. The only reason the markets are doing as well as they are doing (both equity and bonds) is because of zero interest rates. In essence free money from the central banks!"

"The zero interest rate policy of the global central banks is creating a global recession, not a global recovery!"

"Remember, this whole free money binge was to be a bridge over the downturn so the economy would recover. But when you have no-growth, anti-growth policies in place prohibiting real economic growth you are going to have no growth and higher prices."

NO-GROWTH, ANTI-GROWTH POLICIES

  POPULATION GROWTH NEW JOB GROWTH %  
Clinton
75%
 
Bush
25%
 
Obama
16M
2M
12.5%
* Mostly Part Time Jobs

The US needs to grow at close to 10% a year to fund the current debt and entitlement obligations. Charles feels it is obvious that his is not going to happen. "The US is bankrupt! .... like Vallejo, CA we will be forced to restructure!"

"The central banks have no clue what they are doing .. at some point the people will realize the emperor has no clothes and the US debt is not worth the paper it is written on!"

 

 

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Thursday
January 22nd
2015

JOIN THE STUDENT LOAND DEBT JUBILEE

 

Gordon T Long

 

SPECIAL GUEST: Financial Survival Network Radio

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JOIN THE STUDENT LOAN DEBT JUBILEE

with Kerry Lutz & Gordon T Long

AUDO ONLY: 24 Minutes

From the Financial Survival Network:

Gordon T. Long  joined us today. In our last discussion, we talked about the continued decline in credit quality across the nation and the world. Now Gordon has uncovered a new wrinkle in student loan debt. Much of it is being deferred or forebearanced under various government programs, all under the radar screen. We also discussed the reason that QE failed in the US, Japan and elsewhere, and why it will fail in the EU. QE cannot create new demand, it can only move up future demand to the present. Also discussed the buck, the Euro, the Franc the peg and more.

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Monday
January 19th,
2015

Steve Keen talks FINANCIAL REPRESSION

Steve Keen

 

 

SPECIAL GUEST : STEVE KEEN is an Australian economist and author. He was formerly an associate professor of economics at University of Western Sydney. Currently, he is a Fellow at the Centre for Policy Development, and Professor and Head of the School of Economics, History and Politics at Kingston University in London.

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30 Minutes

THE ART OF GETTING AN EDUCATION IN ECONOMICS

Professor Steve Keen has found that top flight universities are dominated by very narrow, doctrinaire teaching. This stylized view has resulted in critics of this view only getting jobs in low ranking university. With pride Steve Keen puts his latest university in that camp. "If you want a good education in Economics, you don't go to a good university. The wider range of thought and diverse analytics is found at the lower ranking university. Kingston University is one of those classic university!"

FINANCIAL REPRESSION

He does not consider himself an Austrian Economist though he sees it has a number of key tenets that 85% of the economist aren't aware.

He sees Financial Repression as more about the size of the debt burden within an economy which drives the behavior of central banks. It is about the excess weight of private debt crushing the economy. Everything else is a result of this."

The results include the "badly thought out Quantitative Easing response to a crisis which they caused by effectively ignoring the growth in private sector debt, but aren't even aware that this is the cause of the crisis." "Very few banks have any real clue of what they are doing. If you doubt this, all you have to do is read the minutes of the Federal Reserve. They wouldn't dare make them up because it makes them look like a bunch of fools who have no idea what is happening."

Obviously this sort of view does not make Professor Keen popular with the establishment, seeking prestigious and lucrative government and teaching positions.

QE IS NOT MONEY PRINTING!

Irving Fishers explanation of where the Great Depression evolved from was the level and growth of private debt along with too low a rate of inflation. Prof Keen is of this school in which reducing this debt will only result in further falling economic growth. Former Fed Chairman and expert on the Great Depression did not believe this. Professor Keen considers Bernanke's argument against this a "load of waffle!". "It is completely naive to the role of banks in the economy!"

Professor lays out why he was able to warn of the coming 2008 Financial Crisis an why he does not feel the current "revival' can last anymore than 5 years before the same sort of thing occurs.

MODERN DEBT JUBILEE

This interview is worth listening to simply for Professor Keens concept of Modern Debt Jubilee and the Syrian history of successfully doing this every 49 years. You may not agree with his view but it an interesting history lesson of how this worked prior to the advent of central banking.

Many may also agree with his views and the discussion on why the Euro was always a mistake as will be Draghi's expected upcoming QE announcment. Few will likely also disagree with Professor Keen that moden central banking do not properly understand the role of banks, money, debt and capitalism.

Steve's closing advise: "Don't trust the economists!!"

 

 

 

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Friday
January 16th,
2015

Martin Armstrong talks FINANCIAL REPRESSION

Martin Armstrong

 

 

SPECIAL GUEST : Martin Arthur Armstrong is the former Chairman of Princeton Economics International Ltd. He is best known for his economic predictions based on the Economic Confidence Model, which he developed. In September 1999, Armstrong faced prosecution by the Securities and Exchange Commission and the Commodity Futures Trading Commission for fraud. During the trial, Armstrong was imprisoned for over seven years for civil contempt of court, one of the longest-running cases of civil contempt in American legal history. In August 2006, Armstrong pleaded guilty to one count of conspiracy to commit fraud, and began a five-year sentence.

 

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28 Minutes

With a history of being primarily a currency forecasting consultant to institutions such as government and large corporations, Martin Armstrong has been advising since the 1974 recession (which was caused by currency) and every crisis since.

FINANCIAL REPRESSION

"What it really is, is a power struggle where we go through cycles where people have confidence in the people, then government. It oscillates back and forth and now we are in a phase we can call the 'Private Sector Phase', where people are questioning government."

"Repression comes in when it is about whatever it takes to maintain power! Largely it is about the fact they are going broke because they have promised all sorts of pensions, and these sorts of things, but they have not funded them!"

GOVERNMENT COMPETENCE

"There is no conspiracy .. it is much worse .. it is really the 'Keystone Cops'! ... government creates the illusion it is in control, but it isn't in control!"

"People give government and politicians way too much credit. They assume they actually know what they are doing! ... what people don't understand about governments is that we have academics advising and primarily lawyers running the government, with few with any experience or understanding of economics. We should hire traders who at least have some experience!"

"They just don't understand. There is no design. Everything has been very 'ad hoc. Its really about the spoils.... giving it to family and friends!"

"If you look at the debt since 1950, you will see that 70% of the national debt is accumulated interest. It didn't go to provide schools and roads and things of this nature. The whole socialist idea is complete nonsense!"

'NO PEG HAS EVER LASTED'

The EU, EURO and the recent removal of the Swiss Franc Euro peg are examples of the fundamental problems with government. Martin has consulted to various EU and Swiss authorities since 1998. He is miffed at what he has witnessed but it is no different than has sees everywhere else.

WE ARE IN A DEBT BUBBLE

"We are not facing a stock market crash, we are facing a bond market crash! That is far worse"

"What people don't realize is that the US Great Depression was a sovereign debt crisis. All of Europe defaulted and went into a moratorium, South America defaulted for about the fourth time and China defaulted. You halt capital formation and that is what a bond crash does. In the great Depression everyone lost. That is what we are facing!"

"We are in a period where on a global scale, capital doesn't know where to go and the culprit is government. We are in period where there is going to be more confidence to buy bonds such as General Motors than that of any government! There is a substantial difference between Private and Public Debt"

RISING TAXES ARE DEFLATIONARY

Martin believes there is an extremely serious tax problem, especially at the municipal level due to unfunded pensions and obligations. Because wages are not rising in the USA, this is now acting in a deflationary fashion.

 

 

 

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Saturday
January 10th,
2015

Robert Wenzel talks FINANCIAL REPRESSION

Robert Wenzel

 

 

SPECIAL GUEST : ROBERT WENZEL  is editor & publisher of EconomicPolicyJournal.com and of Target Liberty. He also hosts the weekly podcast The Robert Wenzel Show. His guests on the show have included, Jesse VenturaRoger Stone, James AltucherDavid StockmanGuy Kawasaki,Oliver StoneJudge Andrew NapolitanoSteve ForbesPeter Schiff and Gary Johnson.

He is author of The Fed Flunks: My Speech at the New York Federal Reserve Bank and the soon to be published, Always Fighting for Freedom: The Early Wenzel.

 

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39 Minutes

Long time Austrian School Economist and Libertarian with a professional background in Wall Street Finance, Robert Wenzel warned of the 2007-2008 Financial Crisis in his book: The Fed Flunks: My Speech at the New York Federal Reserve Bank and was subsequently asked to Washington and the Federal Reserve to detail how he knew where "I really gave it to them!!"

FINANCIAL REPRESSION

He sees the central banks of the world and the Federal Reserve as manipulating the economy through interest rates and flows of funds which makes it very difficult for the individual to make money consistently which represses everyone but gives a major advantage to Wall Street. Much of this is done through restrictive regulations where the "devil is in the details". Very few really understand the significance of the "details".

Active in Silicon Valley, Robert Wenzel has seen closeup how the 'regulatory details' offer major advantage which give staggering advantage and financial gain to the few, but disadvantage or competitively impede many in their business enterprise. Though Robert Wenzel does not use the term he describes the workings of Crony Capitalism which Macro Analytics has chronicled in many previous videos.

"It is a rigged system where they simply write regulations when things go off the rails for them!"

What this means is it is now making it almost impossible for the average person and small business entrepreneur to survive and prosper.

"THE WORST GET TO THE TOP"

When asked how informed politicians are of what is going on, Wenzel is reminded of Nobel Laureate Economist, Fredrich von Hayeks writings in the "Road to Serfdom" that:

"The worse get to the top"

They are willing to say and do anything to get to the top. These are the ones that know what is going on. A lot of elected politicians simply don't know what is going on and are marginalized. As in the world of finance, "bad money forces out good money".

"INFLATION & INTEREST RATE SURPRISES AHEAD"

Wenzel believes the Fed's stated inflation target of 2% is in actuality 3%. Until this level is achieved the Fed is not going to let up. Unfortunately because of the economic lags and distortions in the signals, Wenzel sees it getting out of control resulting in inflation levels not seen since the late 1970's. Having presented at the Federal Reserve, Wenzel says:

"The Fed is surprisingly unaware of anything outside of money printing! ... It is stunning how off the page they are and how they have no clue, as evident in the Fed minutes where they don't even mention the money supply!"

 

 

 

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Friday
January 9th,
2015

Dominic Frisby talks FINANCIAL REPRESSION

 

Dominic Frisby

 

 

SPECIAL GUEST : DOMINIC FRISBY , Comedian & Financial Author.

A comedian 
ʻViciously funny and inventive,ʼ The Guardian; ʻMasterful,ʼ Evening Standard; ʻGreat comedy talent,ʼChortle. I am resident MC at Londonʼs oldest comedy venue, Downstairs At The Kingʼs Head, and have performed many full-length shows – both straight stand-up and character comedy. (Read some reviews).

A writer...
His book, Life After The State, (‘Extraordinary’, James Harding, director of BBC News; ‘Incredibly thought-provoking,’ Al Murray; ‘Brilliant,’ Steve Baker, MP) has nothing to do with comedy. It is a deadly serious dismantling of the way society is run. I am currently working on a second – Bitcoin – the Future of Money?

Dominic co-wrote and narrated the acclaimed documentary about the global financial crisis, The Four Horsemen – 1.25 million hits and counting(‘Excellent writing and narration from DF’ Front Row). I write a weekly investment column for Moneyweek about gold and finance

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27 Minutes

Now 45 years old and having been a comedian since his mid twenties, Dominic Frisby got interested in Economics and Finance in 2005 prior to the Financial Crisis. He subsequently became a devout Gold Bug and follower of Austrian Economics and Sound Money when he decided he needed to manage his money himself.

He concluded that:

"Money should be independent. The role of money is to be a medium of exchange, a store of wealth and a unit of account. But instead Money has become a political tool. The mixing of money and politics is very dangerous!"

Dominic feels strongly that many of our basic daily terminologies such as inflation, capitalism and socialism have become corrupted in their meaning and usage. The same is true for "money". "All of this has distorted people's behavior in an almost corrupt way" which he describes as only a comedian can.

 

DEBT BOMB - The Global Financial Crisis Stripped Bare by Dominic Frisby

FINANCIAL REPRESSION

Dominic Frisby defines Financial Repression as:

"The Government manipulation of money in order to achieve a specific goal. The current goal is to bailout the financial system for the excesses it created in the lead up to the 2008 Financial Crisis and also to bailout themselves."

"Governments have spend way more than they have earned and now have debt that is unpayable and the way they are paying it back is through manipulation, which other people call Financial Repression."

WHAT THE FUTURE HOLDS

"This will go on for my life time and my children's life time .... until something else happens". Frisby says "don't shot the messenger but our leaders have gotten away with it so far and history shows leaders have always played tricks with money and debt". "Financial Repression will always exist as long as we have leaders, just like sinning will always exist - you just have to accept it!".

SOCIAL GOVERNMENT ENTITLEMENTS

The government according to Dominic Frisby, who has spent his life within the UK's social entitlement program, should have nothing to do with Healthcare, Education and Welfare. "All of this doesn't need to be as expensive as it is!"

"We need less state, more market and more ... 'people'!"

CONCLUSION

"We need to question everything, including the questioners questions and their dogma"

 

 

 

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Wednesday
January 7th,
2015

2015 GLOBAL THEMES - Achilles Heel of Deflation

 

Charles Hugh Smith

 

 

Regular Co-Host: CHARLES HUGH SMITH , Author & Publisher of OfTwoMinds.com

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with Charles Hugh Smith & Gordon T Long

27 Minutes - 32 Slides

Charles Hugh Smith and Gordon T Long discuss the Achilles Heel of Central Bank Policy: Deflation. They feel it will be a central theme in 2015 and will foster new central policy initiatives which the financial markets will react violently to.

DEFLATION

Charles Hugh Smith defines Deflation in a different manner than most which leads to some very interesting perspectives and conclusions.

"Any increase in the purchasing power of nominal wages".

  • The rise of software, robotics and global wage arbitrage is resulting in wages not rising along with prices. As a result, everyone who depends on earned income is getting poorer.
  • For the actual real-world the result of central banks easing, money pumping and zero interest rates is Deflation.
  • Central bank easing and zero-interest rate policy (ZIRP) fuel over-capacity which leads to declining prices: deflation with a capital D.
  • Central bank easing and zero-interest rate policy (ZIRP) additionally fuels malinvestment which leads to over valued collateral and an eventual collateral collapse as NPL (non-performing loans) debt cannot to "rolled" (i.e. no one no longer wants to risk financing)

EXCESS INFLATION

Inflation creation when the business cycle needs to contract.

i.e. 2% targets during systemic deleveraging.

  • This is because the Prime Directive of central banks is to make it ever easier to service yesterday's debt.
  • Excessive inflation results from central banks being forced to push negative real interest rates too low (to protect debt holders) relative to real economic expansion and capital wealth creation.

PURCHASING POWER

The store of Purchasing Power is true WEALTH which governments are transferring.

  • All the phantom collateral constructed with mal-invested free money for financiers will eventually implode.

Easy Credit Creates Excess Supply & Demand Which Eventually Reaches Equilibrium

  • BROUGHT FORWARD DEMAND WHICH THEN LEAVES A DEMAND RATE VACUUM
  • INFLATION REDUCES REAL DISPOSABLE INCOME WHICH FURTHER REDUCES DEMAND

== > THE GLOBALIZATION TRAP

 

 

 

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