"The Great Recession is a near-worldwide phenomenon, with the consequences of which many advanced economies continue to struggle. Its depth and breadth appear to have changed the economic environment in many ways and to have left the road ahead unclear .. Work on the use of the resolution mechanisms set out in the Dodd-Frank Act, based on the principle of a single point of entry–though less advanced than the work on capital and liquidity ratios–holds the promise of making it possible to resolve banks in difficulty at no direct cost to the government .. As part of this approach, the United States is preparing a proposal to require systemically important banks to issue bail-inable long-term debt that will enable insolvent banks to recapitalize themselves in resolution without calling on government funding–this cushion is known as a 'gone concern' buffer."
- Federal Reserve Vice Chair Stanley Fischer
LINK HERE to the article
"
Renunciation of U.S. Citizenship
About To Get More Expensive:
From $450 to $2350
America's Corralito Tightens
With an exponentially increasing number of Americans & U.S.-based companies renouncing their citizenship, the U.S. State Department is now looking to raise the cost of renunciation from U.S.$450 to U.S.$2350on individuals .. [Cliff Note: Expect similar regulations or rule changes soon to keep U.S. corporations from renouncing their citizenship through overseas corporate inversions, like what Burger King is doing now .. America's corralito tightens .. ]
LINK HERE to the article
FINANCIAL REPRESSION IS
COMPLETELY DISTORTING
THE PRICING OF BOND RISK
(The RISK is in FIAT US$ CURRENCY)
"
For the first time in history,
(based on FRED data),
the 30Y constant maturity yield is below the real GDP growth level.
"Would the U.S. government really turn to a 1933-style gold grab again? .. I would argue that they wouldn’t, but that doesn’t mean the threat to your gold has diminished .. If the government is looking to confiscate wealth, they’ll likely go for the low-hanging fruit like financial accounts, which can be plundered with a few mouse clicks. Or they’ll continue to ramp up the inflationary money printing, which is a way to confiscate from savers .. If and when an executive order is issued to convert a portion of your retirement savings into unwanted Treasury securities, it will likely apply only to the most susceptible retirement assets — those being accounts with the large, traditional IRA custodians. These assets are soft targets for the government. They could be frozen, confiscated, or nationalized at the flip of a switch."
- Nick Giambruno, Senior Editor InternationalMan
LINK HERE to the article
.. the article emphasizes the approach of financial repression taken by the U.S. & UK in keeping interest rates down & allowing inflation to rise in order to pay off some government debt via inflation, rather than by defaulting or cutting back spending
.. most western world governments are in this bind, so that "we could see interest rates staying lower than markets expect for some time. And in the longer run, we could see a lot more inflation than we’ve been used to as well"
"
FINANCIAL REPRESSION REQUIRED
TO PAY GOVERNMENT DEBTS
& UNFUNDED OBLIGATIONS
MONEYWEEK.COM article points out the worse things get on the European financial/economic crisis, the more pressure there is on the European Central Bank (ECB) to print money
- stocks will likely go up as this happens on the anticipation that the ECB will given in & start money printing
.. "TheECB would print money and use it to buy eurozone government bonds, in order to prop up the region’s banking sector, and to encourage more risk-taking by lenders and investors. Of course, any hint of more money-printing always cheers the market, and European stocks reacted well to the news."
.. the article points to how U.S. & UK stocks have similarly reacted positively on all the money printing
.. whether all this money is good for the economy or whether it even benefits the economy in any positive way is another question
.. in terms of investing, the article suggests sticking with countries that are looking to do more money printing & that have relatively inexpensive stock markets, such as Europe or Japan
LINK HERE to the article
"In most countries, it’s extremely unlikely that the government will outright seize pensions. In America, it’s nearly impossible to change Social Security or Medicare benefits, and the idea of the U.S. government confiscating everyone’s 401(k) is unimaginable to all but the most ardent conspiracy theorists.
However, it’s not unrealistic to think that the American government could take a bigger bite out of individuals’ 401(k) assets with higher tax rates: Income taxes are at historic lows, and if the American government needs to raise revenue in the future, taxes on 401(k) withdrawals may be higher (along with taxes on everything else).
"
Emerging Pattern of Wealth Confiscation
- Russia Confiscates Private Retirement Savings -
Businessweek reports that earlier this month, the Russian government seized its citizens’ pension contributions - 6% of Russians’ salaries is invested in financial markets, earmarked for their retirement, but this year that $8 billion in contributions will finance Russian spending instead .. "Russia is not the first country to confiscate pension assets to pay its bills, and it probably won’t be the last .. For governments facing financial pressure, billions of dollars of pension assets proved too tempting to resist." .. Argentina recently “nationalized” $30 billion of pension assets & Hungary, Poland, Portugal, & Bulgaria have done the same ..
Casey Research's Nick Giambruno sees an emerging pattern of wealth confiscation globally, identifies Portugal as a likely next country candidate in this regard .. "It starts out with government officials telling you everything is all right—when clearly everything is not all right." .. here is a summary of the pattern:
1. COUNTRY GETS INTO SERIOUS FINANCIAL TROUBLE
2. OFFICIAL GOVERNMENT DENIALS
3. SURPRISE BANK HOLIDAY/CAPITAL CONTROLS
4. CONFISCATION
Portugal is clearly at the first stage in the pattern—serious financial trouble .. recommends taking your money out of Portuguese banks while you can .. "When it comes to protecting yourself from confiscations, capital controls, bank holidays, and other desperate measures of an out-of-control government, it’s absolutely essential to take action before it’s too late .. While the window is still open for those in the U.S. to protect themselves, the warning signs are clearly there. And the writing is on the wall." .. another example of financial repression.
"'Since the financial crisis, the world's central banks have collectively put more than $10 trillion into the financial system. This kind of money printing is literally unheard of in modern history. And it has set the stage for a roaring wave of inflation.' -- Graham Summers, analyst .. With the world in a deflationary recession, I now doubt we'll see new highs in the D-J Averages. But with enough QE, it might be possible .. With deflation enveloping the world, investors have been racing to buy Treasury bonds, whose yields have sunk to record lows. My survival choice in investments continues to be silver and gold .. Today it finally happened: I received an advertisement from a firm featuring a scare I've been waiting for. There are two ways for the government to handle its outrageous debts. The first is reneging, as per Argentina, but this is unthinkable. The second way is via inflation -- inflate enough and your debts appear to shrink. Ah, but there's a third way, and it's confiscation of wealth. Don't think this is impossible, because governments will do whatever they have to to remain in power. How about confiscating all individual wealth above $200,000, for which the government will give you stubs which will say IOU. This will be a switch on the 1933 confiscation of gold. This time it may be confiscation of cash. Finally, something new to worry about." .. it's default or financial repression, take your pick.
- Richard Russell*
link here to the article
Small Business has historically been the life blood of America.
It no longer is for a consolidated banking industry.
THE BANKING INDUSTRY
IS NO LONGER EFFECTIVELY
SERVING AMERICA!
"
FINANCIAL REPRESSION INCENTS BANKS INTO
WHOLESALE SECURITIZATION OF LOANS
REPO COLLATERAL ACTIVITES OF THE SHADOW BANKING INDUSTRY
NOT THE RETAILING OPERATIONS OF MAKING (EXPENSIVE) SMALL BUSINESS LOANS!
Treasury Department officials are assembling a list of administrative options for Secretary Jacob Lew to consider for ways to deter or prevent U.S. companies from reorganizing overseas primarily to avoid paying federal taxes
Some Democrats in Congress believe lawmakers should pass a stopgap measure to deter companies from pursuing the deals, while some Republicans have said the only way to stop inversions is through an overhaul of the tax code.
others believe the White House has ample flexibility to step in and have raised different ideas for administrative actions, including
Indebted Governments Will Resort To Capital Controls
Daily Reckoning commentary on how indebted, western-world governments will likely begin instituting draconian controls & regulations on restricting the movement of money, all with the goal of keeping itself alive & not going into default on its debt while at the same time maintaining a relatively strong currency
.. "The U.S. government, along with other Western countries and innumerable banking institutions, is starting to make it very difficult for regular citizens — you, me and the nice lady next door — to move money
.. In essence, capital controls enable governments to limit the flow of money coming in and out of their country in the hopes of manufacturing conditions that protect the value of their currency. As we reach a fiscal tipping point, we could very well see our government revert to making use of capital controls."
"A new supervision framework is required to revive the euro area’s single financial market with the assurance that it will yield more benefits than costs. So far, balkanization of banking rules among assorted national supervisors has been a barrier for cross-border lending. This will be lifted with the ECB taking the role of a new single supervisor on Nov. 4.
As Draghi pointed out, “There will no longer be a distinction between home and host supervisors for cross-border banks. Instead, there will be a single supervisory model and eventually a single supervisory culture, rather than one per country.”
As a result, banks could see a reduction in compliance costs and an increase in opportunities for economies of scale, even if taxes will still differ according to member states’ fiscal policies. For the longer term, the authority given to the single supervisor may also improve the monitoring of systemically relevant banks, helping to curb sector excesses and risk.
The transfer of power to a single European bank supervisor should be a game changer.
The ECB is hoping to do more than simply strengthen financial stability. It also envisions unified authority as a tool to repair the broken channels of monetary policy transmission, prompting banks to make their comeback at the periphery and improve credit conditions there. The central bank timidly expressed this wish in its latest financial integration report, stating that “the banking union is expected to contribute indirectly to the return of cross border credit flows."
Other non-banks to face 'designation' as "systemic risks to the financial system"
The Fed has insisted that the Dodd-Frank financial reform bill forced it to apply bank capital standards to non-banks. In response, the Senate recently passed a bill that would give the Fed the room to apply capital standards that are tailored for the insurance industry
Life insurer MetLife is waiting to see if it will be designated this year, while its smaller rival
LARGEST ASSET MANAGERS: On July 31, FSOC decided for now to lift the threat of systemic risk designations for the largest asset managers, but said it would focus on the industry’s products and activities.
PRIVATE EQUITY & HEDGE FUNDS: The review of asset managers came after an FSOC-commissioned report on the industry, which also said it was reviewing private equity and hedge funds, prompting predictions that those sectors could be next on the council’s agenda.
LATEST MACRO ANALYTICS ON FINANCIAL REPRESSION
LATEST UnderTheLens UPDATE ANALYSIS ON FINANCIAL REPRESSION
“Redemption Gates” for Money Market Funds Acting Man -- ""The adoption of 'redemption gates' effectively means that money market fund boards will be able to suspend the property rights of their customers. Once again, this creates a big disadvantage for the money market fund industry in favor of banks, since demand deposits will continue to lack such 'redemption gates', in spite of the fact that banks are de facto unable to actually pay out all demand deposits, or even a large portion of them, 'on demand'. It is an interesting detail that retail customers are to be exempt from this regulation based on the idea that they are basically too addled to react to crisis conditions. Why are such regulations held to be required at all? Are regulators implying that the system has not been 'made safe' by adopting several telephone book-sized tomes of additional regulations?""
SEC Votes Through Money Market Exit Gates Zero Hedge -- the SEC has adopted the news rules designed to curb the risk of money market investor runs .. "Among the changes, funds will have to switch to a floating share price instead of the current $1/share (hence the term breaking the buck). But the key part: 'The SEC's rule will require prime money market funds to move from a stable $1 per share net asset value, to a floating NAV. It also will let fund boards lower redemption 'gates' and fees in times of market stress." .. suggests this may send money market investor rushing out & into other asset classes - the SEC, the Federal Reserve & the U.S. Treasury hope that asset class is stocks to keep the stock market rising .. "Clearly, everyone understand that the only purpose behind implementing 'gates' is to redirect the herd. And with some $2.6 trillion in assets, money markets can serve as a convenient source of 'forced buying' now that QE is tapering if only for the time being. The only question is whether the herd will agree to this latest massive behavioral experiment by the Fed, and allocate their funds to a stock market which is now trading at a higher P/E multiple than during the last market peak."
U.S. SEC poised to adopt reforms for money market funds Reuters
Fund managers on alert over money market shake-up FT -The SEC is looking to drive money market funds to only government securities, especially institutional money market funds - this means money market funds will be helping to pay for the government debt .. The SEC is also planning to allow fees and restrictions on redemptions in times of stress, but it is not clear how widely these will be applied across the money markets - FT: "Any restrictions on redemptions may not be severe at first, but the regulations will only become more restrictive over time. Don't waste time thinking you are going to monitor the situation and get out later. Get out now, when the getting is easy."
Do you know the difference between a money market fund and a money market account? CNBC Personal Finance Reporter Sharon Epperson explains the big difference
BAIL-IN (GLOBAL - G20 LEGISLATION)
Australia: 'Bail in' Rules May Be Inevitable In Australia - August 22, 2021 Bail in' rules may be inevitable, says David Murray of the Financial Systems Inquiry Chair in Australia .. "It appears there’s a wide consensus that bail-in would considerably expand the buffer, would further assist in the mechanisms for the protection of depositors, and importantly would create a system where it is less likely that the government would be dragged into a crisis." .. Australia may have little choice but to adopt “bail-in” rules that expose bank creditors to losses, due to our dependence on foreign capital .. more financial repression.
Canada: Department Of Finance Releases Proposal For Canadian Bail-In RegimeCanada's government is looking to implement a bail-in regime to limit exposure to a government bailout - the idea is for troubled banks to shaft bank depositors of their bank deposits first .. "The G-20, including Canada, endorsed the Financial Stability Board's Key Attributes of Effective Resolution Regimes for Financial Institutions in 2011, a set of best practices for the resolution of financial institutions which contemplates the establishment of a bail-in regime."
Bloomberg reported in December 2012 that the “IMF has endorsed the use of capital controls in certain circumstances.“ This is particularly important because the IMF, arguably an even more prominent institution since the global financial crisis started, has always had an official stance against capital controls. “In a reversal of its historic support for unrestricted flows of money across borders, the IMF saidcontrols can be useful...” Will individual governments jump on this bandwagon? “It will be tacitly endorsed by a lot of central banks,”says Boston University professor Kevin Gallagher. If so, it could be more than just your home government that will clamp down on storing assets elsewhere.
2: There Is Academic Support for Capital Controls
Many mainstream economists support capital controls. For example, famed Harvard Economists Carmen Reinhart and Ken Rogoff wrote the following earlier this year:
Governments should consider taking a more eclectic range of economic measures than have been the norm over the past generation or two. The policies put in place so far, such as budgetary austerity, are little match for the size of the problem, and may make things worse. Instead, governments should take stronger action, much as rich economies did in past crises.
Aside from the dangerously foolish idea that reining in excessive government spending is a bad thing, Reinhart and Rogoff are saying that even more massive government intervention should be pursued. This opens the door to all kinds of dubious actions on the part of politicians, including—to my point today—capital controls.
“Ms. Reinhart and Mr. Rogoff suggest debt write-downs and ‘financial repression’, meaning the use of a combination of moderate inflation and constraints on the flow of capital to reduce debt burdens.” The Reinhart and Rogoff report basically signals to politicians that it’s not only acceptable but desirable to reduce their debts by restricting the flow of capital across borders. Such action would keep funds locked inside countries where said politicians can plunder them as they see fit.
3: Confiscation of Savings on the Rise
“So, what’s the big deal?” Some might think. “I live here, work here, shop here, spend here, and invest here. I don’t really need funds outside my country anyway!” Well, it’s self-evident that putting all of one’s eggs in any single basket, no matter how safe and sound that basket may seem, is risky—extremely risky in today’s financial climate. In addition, when it comes to capital controls, storing a little gold outside one’s home jurisdiction can help avoid one major calamity, a danger that is growing virtually everywhere in the world: the outright confiscation of people’s savings.
The IMF, in a report entitled “Taxing Times,” published in October of 2013, on page 49, states: “The sharp deterioration of the public finances in many countries has revived interest in a capital levy—a one-off tax on private wealth—as an exceptional measure to restore debt sustainability.”
The problem is debt. And now countries with higher debt levels are seeking to justify a tax on the wealth of private citizens. So, to skeptics regarding the value of international diversification, I would ask: Does the country you live in have a lot of debt? Is it unsustainable? If debt levels are dangerously high, the IMF says your politicians could repay it by taking some of your wealth.
The following quote sent shivers down my spine…
The appeal is that such a task, if implemented before avoidance is possible and there is a belief that is will never be repeated, does not distort behavior, and may be seen by some as fair. The conditions for success are strong, but also need to be weighed against the risks of the alternatives, which include repudiating public debt or inflating it away.
The IMF has made it clear that invoking a levy on your assets would have to be done before you have time to make other arrangements. There will be no advance notice. It will be fast, cold, and cruel. Notice also that one option is to simply inflate debt away. Given the amount of indebtedness in much of the world, inflation will certainly be part of the “solution,” with or without outright confiscation of your savings. (So make sure you own enough gold, and avoid government bonds like the plague.)
Further, the IMF has already studied how much the tax would have to be: The tax rates needed to bring down public debt to pre-crisis levels are sizable: reducing debt ratios to 2007 levels would require, for a sample of 15 euro area countries, a tax rate of about 10% on households with a positive net worth. Note that the criterion is not billionaire status, nor millionaire, nor even “comfortably well off.” The tax would apply to anyone with a positive net worth. And the 10% wealth-grab would, of course, be on top of regular income taxes, sales taxes, property taxes, etc.
4: We Like Pension Funds
Unfortunately, it’s not just savings. Carmen Reinhart (again) and M. Belén Sbrancia made the following suggestions in a 2011 paper:
Historically, periods of high indebtedness have been associated with a rising incidence of default or restructuring of public and private debts. A subtle type of debt restructuring takes the form of ‘financial repression.’ Financial repression includes directed lending to government by captive domestic audiences (such as pension funds), explicit or implicit caps on interest rates, regulation of cross-border capital movements, and (generally) a tighter connection between government and banks.
Yes, your retirement account is now a “captive domestic audience.” Are you ready to “lend” it to the government? “Directed” means “compulsory” in the above statement, and you may not have a choice if “regulation of cross-border capital movements”—capital controls—are instituted.
5: The Eurozone Sanctions Money-Grabs
Germany’s Bundesbank weighed in on this subject last January:
“Countries about to go bankrupt should draw on the private wealth of their citizens through a one-off capital levy before asking other states for help.”
The context here is that of Germans not wanting to have to pay for the mistakes of Italians, Greeks, Cypriots, or whatnot. Fair enough, but the “capital levy” prescription is still a confiscation of funds from individuals’ banks or brokerage accounts.
Here’s another statement that sent shivers down my spine:
A capital levy corresponds to the principle of national responsibility, according to which tax payers are responsible for their government’s obligations before solidarity of other states is required.
The central bank of the strongest economy in the European Union has explicitly stated that you are responsible for your country’s fiscal obligations—and would be even if you voted against them! No matter how financially reckless politicians have been, it is your duty to meet your country’s financial needs.
This view effectively nullifies all objections. It’s a clear warning.
And it’s not just the Germans. On February 12, 2014, Reuters reported on an EU commission document that states:
The savings of the European Union’s 500 million citizens could be used to fund long-term investments to boost the economy and help plug the gap left by banks since the financial crisis.
Reuters reported that the Commission plans to request a draft law, “to mobilize more personal pension savings for long-term financing.”
EU officials are explicitly telling us that the pensions and savings of its citizens are fair game to meet the union’s financial needs. If you live in Europe, the writing is on the wall.
Actually, it’s already under way… Reuters recently reported that Spain has
…introduced a blanket taxation rate of .03% on all bank account deposits, in a move aimed at… generating revenues for the country’s cash-strapped autonomous communities.
The regulation, which could bring around 400 million euros ($546 million) to the state coffers based on total deposits worth 1.4 trillion euros, had been tipped as a possible sweetener for the regions days after tough deficit limits for this year and next were set by the central government.
Some may counter that since Spain has relatively low tax rates and the bail-in rate is small, this development is no big deal. I disagree: it establishes the principle, sets the precedent, and opens the door for other countries to pursue similar policies.
6: Canada Jumps on the Confiscation Bandwagon
You may recall this text from last year’s budget in Canada:
“The Government proposes to implement a bail-in regime for systemically important banks.”
A bail-in is what they call it when a government takes depositors’ money to plug a bank’s financial holes—just as was done in Cyprus last year.
This regime will be designed to ensure that, in the unlikely event a systemically important bank depletes its capital, the bank can be recapitalized and returned to viability through the very rapid conversion of certain bank liabilities into regulatory capital.
What’s a “bank liability”? Your deposits. How quickly could they do such a thing? They just told us: fast enough that you won’t have time to react.
By the way, the Canadian bail-in was approved on a national level just one week after the final decision was made for the Cyprus bail-in.
7: FATCA
Have you considered why the Foreign Account Tax Compliance Act was passed into law? It was supposed to crack down on tax evaders and collect unpaid tax revenue. However, it’s estimated that it will only generate $8.7 billion over 10 years, which equates to 0.18% of the current budget deficit. And that’s based on rosy government projections.
FATCA was snuck into the HIRE Act of 2010, with little notice or discussion. Since the law will raise negligible revenue, I think something else must be going on here. If you ask me, it’s about control.
In my opinion, the goal of FATCA is to keep US savers trapped in US banks and in the US dollar, in case the US wants to implement a Cyprus-like bail-in. Given the debt load in the US and given statements made by government officials, this seems like a reasonable conclusion to draw.
This is why I think that the institution of capital controls is a “when” question, not an “if” one. The momentum is clearly gaining steam for some form of capital controls being instituted in the near future. If you don’t internationalize, you must accept the risk that your assets will be confiscated, taxed, regulated, and/or inflated away.
What to Expect Going Forward
First, any announcement will probably not use the words “capital controls.” It will be couched positively, for the “greater good,” and words like “patriotic duty” will likely feature prominently in mainstream press and government press releases. If you try to transfer assets outside your country, you could be branded as a traitor or an enemy of the state, even among some in your own social circles.
Controls will likely occur suddenly and with no warning. When did Cyprus implement their bail-in scheme? On a Friday night after banks were closed. By the way, prior to the bail-in, citizens were told the Cypriot banks had “government guarantees” and were “well-regulated.” Those assurances were nothing but a cruel joke when lightning-fast confiscation was enacted.
Restrictions could last a long time. While many capital controls have been lifted in Cyprus, money transfers outside the country still require approval from the Central Bank—over a year after the bail-in.
They’ll probably be retroactive. Actually, remove the word “probably.” Plenty of laws in response to prior financial crises have been enacted retroactively. Any new fiscal or monetary emergency would provide easy justification to do so again. If capital controls or savings confiscations were instituted later this year, for example, they would likely be retroactive to January 1. For those who have not yet taken action, it could already be too late.
Social environment will be chaotic. If capital controls are instituted, it will be because we’re in some kind of economic crisis, which implies the social atmosphere will be rocky and perhaps even dangerous. We shouldn’t be surprised to see riots, as there would be great uncertainty and fear. That’s dangerous in its own right, but it’s also not the kind of environment in which to begin making arrangements.
Ban vs. levy. Imposing capital controls is a risky move for a government to make; even the most reckless politicians understand this. That won’t stop them, but it could make them act more subtly. For instance, they might not impose actual bans on moving money across borders, but instead place a levy on doing so. Say, a 50% levy? That would “encourage” funds to remain inside a given country. Why not 100%? You could be permitted to transfer $10,000 outside the country—but if the fee for doing so is $10,000, few will do it. Such verbal games allow politicians to claim they have not enacted capital controls and yet achieve the same effect. There are plenty of historical examples of countries doing this very thin
Keep in mind: Who will you complain to? If the government takes a portion of your assets, legally, who will you sue? You will have no recourse. And don’t expect anyone below your tax bracket to feel sorry for you.
POLICY CONTROLS (Monetary, Fiscal, Public & Tax Policy)
Monetary Policy & Financial Repression in Britain, 1951 - 59 New book coming out by William Allen on Monetary Policy and Financial Repression in Britain, 1951 - 59 .. this book explores the politics of formulating monetary policy in the 1950s, the tools implementing it & discusses the parallels between the present monetary policy & that of 1951 .. "Drawing on official archives, this study describes how monetary policy was decided on, implemented and communicated at a time when the government was struggling with massive post-war debts while maintaining welfare and military spending and cutting taxes. It discusses the roles of the Governor of the Bank of England, Cameron Cobbold, and of successive Chancellors R.A. Butler, Harold Macmillan, Peter Thorneycroft and Derick Heathcoat Amory, and Macmillan's continued dominance of monetary policy after he became Prime Minister. It explains the intimate relationships between monetary policy, government debt management and fiscal policy, and the use of 'financial repression'."
Low Interest Rates & Inflation To Address Financial RepressionArticle points out the worse things get on the European financial/economic crisis, the more pressure there is on the European Central Bank (ECB) to print money - stocks will likely go up as this happens on the anticipation that the ECB will given in & start money printing .. "The ECB would print money and use it to buy eurozone government bonds, in order to prop up the region’s banking sector, and to encourage more risk-taking by lenders and investors. Of course, any hint of more money-printing always cheers the market, and European stocks reacted well to the news." .. the article points to how U.S. & UK stocks have similarly reacted positively on all the money printing .. whether all this money is good for the economy or whether it even benefits the economy in any positive way is another question .. the article emphasizes the approach of financial repression taken by the U.S. & UK in keeping interest rates down & allowing inflation to rise in order to pay off some government debt via inflation, rather than by defaulting or cutting back spending .. most western world governments are in this bind, so that "we could see interest rates staying lower than markets expect for some time. And in the longer run, we could see a lot more inflation than we’ve been used to as well" .. in terms of investing, the article suggests sticking with countries that are looking to do more money printing & that have relatively inexpensive stock markets, such as Europe or Japan.
This Is Going To Destabilize The Entire World Financial System Ronald-Peter Stoferle, Incrementum AG "Bond prices in practically all industrialized nations are near all-time highs. Never before have interest rates been this low on a global basis. If one examines these events more closely, it becomes clear that the underlying problems cannot be solved by global zero interest rate policy, but that the natural selection process of the market is instead being undermined .. Interest rates are the heart, soul and life of the free enterprise system .. This truth is however veiled and distorted at the moment. Governments, financial institutions, entrepreneurs and consumers that are acting in an uneconomic manner are thus kept artificially afloat. As a result, instead of them being punished for their errors, these errors are perpetuated. Protraction of this process of selection leads to a structural weakening of the economy, and a concomitant increase in the system's fragility .. Declining interest rate levels make a gradual increase in public indebtedness possible, while the interest burden (as a share of government spending) does not grow .. Without negative real interest rates, the steadily growing mountains of debt would long ago have ceased to be sustainable. Central banks are increasingly prisoners of the policy of over-indebtedness .. Central banks and governments are currently trying to create an increase in prosperity out of nothing. Such a monetary perpetuum mobile would be quite desirable for humankind, however, historically such attempts have at best led to a brief sugar high followed by a major hangover.
Alasdair Macleod On The Markets: Keep Calm & Carry On"Investment is now all about the trend and little else. You never have to value anything properly any more: just measure confidence. This approach to investing resonates with post-Keynesian economics and government planning. The expectations of the crowd, or its animal spirits, are now there to be managed. No longer is there the seemingly irrational behaviour of unfettered markets dominated by independent thinkers. Forward guidance is just the latest manifestation of this policy. It represents the triumph of economic management over the markets .. Doubtless there is a growing band of central bankers who believe that with this control they have finally discovered Keynes’s Holy Grail: the euthanasia of the rentier and his replacement by the state as the primary source of business capital. This being the case, last month’s dip in the markets will turn out to be just that, because intervention will simply continue and if necessary be ramped up .. But in the process, all market risk is being transferred from bonds, equities and all other financial assets into currencies themselves; and it is the outcome of their purchasing power that will prove to be the final judgement in the debate of markets versus economic planning."
The Fed's Financial Repression At Work: How Big Blue Was Turned Into A Wall Street Slush Fund David Stockman -- "IBM is a poster child for the ill-effects of the Fed’s financial repression. In effect, the Fed’s zero interest rate policies are telling big companies to issue truckloads of debt and use the proceeds to buyback shares hand-over-fist. That way fast money speculators on Wall Street are appeased by the resulting share price lift, and top executives collect bigger winnings on their stock options."
BoJ To Engage In 'Financial Repression'; We Stay Long USD/JPY - BNPP 07-11-14 eFX News "Japan now has one of the highest inflation rates in the G10. Our economists expect the BoJ to engage in ‘financial repression’ to restrain the rise in JGB yields that results from Japan’s fiscal dynamics," BNPP says as a rationale behind this view. "A larger overshoot in Japan’s inflation rate would also see the yen weaken. If inflation gets out of hand, we could, our economists suggest, see an ‘operation twist’ policy in Japan – similar to that witnessed in the US. This would entail aggressive purchases of JGBs coupled with interest rate hikes to stave off inflation. The resultant inversion in the yield curve, along with the upside shock to inflation, is a risk scenario for Japan and the ensuing adverse growth-inflation paradigm would necessarily entail a weaker yen," BNPP argues. "In addition, a re-allocation in the government pension investment fund (GPIF) and a likely pick-up in Japanese outflows will mean JPY weakens," BNPP adds.
U.S. Pushing Banks On Dodd-Frank Act To Make It Easier For Government To FREEZE YOUR MONEY - Financial Repression Via Regulations"The U.S. wants big banks to simplify their Dodd-Frank Act resolution plans so it's easier for government to freeze your money." .. Bloomberg reports on the progress made by Wall Street banks developing their "living wills" as part of the Dodd-Frank Act legislation attempting to minimize "too big to fail" banks .. Bloomberg: "The Federal Reserve and Federal Deposit Insurance Corp. told 11 of the largest U.S. and foreign banks, including JP Morgan Chase & Co. (JPM) and Goldman Sachs Group Inc. (GS), that they botched their so-called living wills. The agencies ordered the banks to simplify their legal structures and revise some practices to make sure they can collapse without damaging the wider financial system." Jim Rickards:
Fischer worries about macroprudential policy- 07-10-14 FT Mr Fischer’s most interesting remarks relate to his experience with macroprudential policy in Israel. Israel’s bank supervisor used a range of tools to restrict mortgage lending and try to avert a housing bubble. Mr Fischer draws three lessons:
Through the Process of Abstraction the 2012 Thesis outlines how the Global Macro is presently on a well defined path towards a global Fiat Currency Failure and the emergence of a New World Order.
2012 will be highlighted by social unrest during a period of heightened conflict and tension. As economic growth declines and chronic unemployment becomes even more broad based on the world stage, Macro Prudential Policies of Financial Repression will accelerate.
Increasing centralized planning and control by sovereign government will further push advanced societies towards collectism and statism.
ABSTRACTION
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LATEST LONG Wave TECHNICAL ANALYSIS ON FINANCIAL REPRESSION
Coming in July
STRATEGIC MACRO INVESTMENT INSIGHTS
The Indirect Exchange - The Expert in the Indirect Exchange is Ty Andros, Tedbits
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Financial Repression describes an economic policy in which capital controls and regulations are implemented by governments and central banks, the aim of which is to reduce public debt burdens through the distortion of financial market pricing.
"When things get bad enough, governments will do anything." – Jim Rickards
"People ask if we'll have a 'bail-in' in the United States .. Given ATM limits, foreign wire limits and Federal Reserve exit fees on bond funds, I'd say it's already here." - Jim Rickards
1- Negative Real Rates
2- Disruption of Price Discovery
3- Mispricing of Risk
4- Sustained Financial Distortions
5- Restrictive Financial Choices
6-Confiscation of Wealth Through Inflation
Financial Repression always means a combination of measures that lead to a notable narrowing of the investment universe for investors. Money is thus channeled into specific directions to create a ‘home bias.
TOOLS USED
The next bailout will be the U.S. government. They will seize all pension funds and 401Ks to absorb the debt. They are realizing that as the war cycle turns up, less and less foreigners will buy U.S. debt ... The solution – forced loans." - Martin Armstrong
"We’re going to take your pension plan and give you government bonds so that you have a guaranteed return .. That’s how they’ll rationalize taking our money. They know where all the pension plans are because we have to report it, so they’re easily accessible by governments. They know where they are, what they are, and they’ll be able to snatch them away. Who knows what they’ll do, but they’ll certainly find some way to take our money when things get worse, they always have." – Jim Rogers
1- Strict investment regulations (Solvency II, Basel III)
2- Negative real interest rates g
3- Interest rate ceilings s
4- Open credit dirigisme
5- Nationalizations
6-Regulation of cross-border capital movementst
7- Prohibition of unwanted trading practices such as naked short selling
8- Compulsory loans
9- Prohibition of certain investment assets (e.g. gold)
10- Special taxes (e.g. securities taxes, financial transaction taxes, wealth taxes, higher value added tax on silver, import duties on gold etc.)
11- Direct interventions, such as government intervention in pension funds (Portugal, Ireland, France, Hungary) and subsequent redeployment of investments in favor of government bonds.
12-Growing discrepancy between financing costs of private sector participants versus governments.
13- Haircuts on deposits (e.g. Cyprus)
OUR COMMENTARY
"This manipulation of the yield on government debt is the answer for the government, and socially, it is so much more acceptable than the alternatives. Whatever you think of the history of hyperinflation, austerity, default and deflation, they are socially incredibly disruptive, incredibly socially dangerous, and many of those market-driven events have led to warfare or massive domestic social unrest. I think in the grand scheme of things when the government sits down and decides which avenue to pursue, this avenue of repression .. will always be more socially acceptable than the market-driven events of austerity, hyperinflation, deflation, devaluation." - Russell Napier, CLSA
From the U.S. standpoint, it’s now a case of 'inflate or die,' and much of the world knows this. Thus if the U.S. decides not to default on its massive debts, it will have to resort to hyperinflation. If this happens, the U.S. will single-handedly tear the world monetary system apart. What worries me is that governments will do whatever they have to in order to remain in power. This can result in confiscation of the assets of U.S. citizens .. America's massive debts will ultimately upset the world’s monetary system." - Richard Russell
PRESENTATIONS
GRAPHICS
"There will be future bail-ins [loss of deposits] and other types of confiscation of wealth in the eurozone, without a doubt .. There's no other realistic way forward if politicians continue to fail to deal with the basic indebtedness problem across Europe." - Lars Christensen, the Head of Saxo Bank
Click Graphics to Enlarge
VIDEO LIBRARY
“By a continuing process of inflation, governments can confiscate, secretly and unobserved, an important part of the wealth of their citizens. By this method they not only confiscate, but they confiscate arbitrarily; and, while the process impoverishes many, it actually enriches some. The sight of this arbitrary rearrangement of riches strikes not only at security, but at confidence in the equity of the existing distribution of wealth.. “..There is no subtler, no surer means of overturning the existing basis of society than to debauch the currency. The process engages all the hidden forces of economic law on the side of destruction, and does it in a manner which not one man in a million is able to diagnose.”-John Maynard Keynes
PODCASTS
EDUCATIONAL AIDS
The term ‘Financial Repression’ was first employed by McKinnon and Shaw in 1973 and has been rediscovered in the course of the current crisis by Reinhart and Sbrancia in their paper “The Liquidation of Government Debt.”
Federal Reserve Must Print Money To Keep Interest Rates Low - Cliff Küle 05 June 2021
Financial Repression To Accelerate With Increased Desperation- KWN 24 March 2021
Through the Process of Abstraction the 2012 Thesis outlines how the Global Macro is presently on a well defined path towards a global Fiat Currency Failure and the emergence of a New World Order. 
