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The Financial Repression Authority

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Last Update:  Monday 3/16/15 4:37 AM

   

 

 

Financial Repression Consequences:

Central Banks are Punishing Savers

For the Benefit of Governments & the Banks

"These days, interest rates tell us little about a nation’s creditworthiness .. The culprit behind this mess is a familiar one: central banks. Targeted rate reductions, quantitative easing, and other easy-money shenanigans have pushed rates to the floor .. and through it in some cases. Germany, Switzerland, Japan, France, Holland, and even troubled Italy are among the growing number of countries with negative-yielding government bonds. Negative-interest-rate policies (NIRP) have even spilled over into the corporate world. This upside-down environment makes it difficult for investors to grasp underlying economic conditions, especially since there’s no historic precedent. Credit has never been so abundant. The world has also never had so many currencies deadlocked in a race to the bottom. We are truly in uncharted territory .. Artificially suppressed rates have punished savers, encouraged reckless consumerism, and spurred share buyback crazes in the United States and Japan—a trend that’s likely to pick up in Europe now that the European Central Bank has begun its own bond-buying program .. Monetary policy is the only game in town."
- Casey Research

LINK HERE to the ARTICLE

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Financial Repression:

Regulators Restricting and Directing

Investor Freedom and Behavior

Market Watch article reports on new rules by the SEC on certain bond funds to prevent an investor exodus of a short period of time, similar to what happened at the beginning of the financial crisis .. these rules are influencing investor behavior .. [This is another example of financial repression - governments & regulators 'ring-fencing' to control the movement of capital.]

LINK HERE to the ARTICLE

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Investing Priorities in Financial Repression:

Regular Income, Preservation of Capital,

Inflation-Purchasing Power Protection

Create Research's Amin Rajan sees the changing priorities of investors & in particular retirement money going into a new breed of diversified funds that target the evolving priorities - see above chart .. financial repression in a debt-fueled world are causing investors to rethink & to reallocate their funds .. permission for the below article provided by Amin Rajan, Create Research www.create-research.co.uk

LINK HERE to the ARTICLE

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 Download Report

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".

 

 

 

 

AMIN RAJAN talks INVESTING IN A DEBT-FUELED WORLD with the FRA

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 Government

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"

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!"

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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Bank Bailin for Austrian Bank

Heta Bank in Austria has perhaps reached the end of the road. The bank, which was bailed out by the Austrian Government a few years ago & is now in need of another bailout but none will be forthcoming .. Rather, bondholders & creditors will be paying for the bailout & this will have the effect of triggering the CDSs (Credit Default Swaps). Will this lead to a series of cascading collapses among banks across the world? That's the fear among many alternative economists across the globe, only time will tell .. 24 minutes

LINK HERE to the video

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Financial Repression

Creating Distorted Market Prices

& Divergence Between Wall Street & Main Street

"All of the massive liquidity—-which took the Fed’s balance sheet from $900 billion to $2.5 trillion in less than a year—–worked it magic in the canyons of Wall Street, not in the household and business sectors of the main street economy .. The 5X gain in the Fed’s balance sheet .. has not been harmless——even though it has not stimulated the main street economy. What is has done, obviously, is reflate a massive financial bubble. The latter will splatter eventually, sending the main street economy into a new tailspin of short-term labor and inventory liquidation and another financial crisis for no reason whatsoever .. Do not these clueless Keynesian apparatchiks recognize that the money market rate and the yield curve are the most important prices in all of capitalism, and that their policy of massive and continuous financial repression generates blatantly false prices in the financial markets and therefore rampant speculation and asset price inflation? .. Needless to say, another quarter of no 'escape velocity' on main street and a further round of Kool Aid drinker speculation on Wall Street takes us just that much closer to the brink. Yet the Fed remains oblivious and continues to manufacture excuses and equivocations as to why ZIRP should extend into its 80th month and beyond .. This is mis-governance on a colossal scale. So when the next thundering crash occurs—-it is devoutly to be hoped that 'audit the Fed' turns out to be the least of the threats descending on the Eccles Building."

- David Stockman

LINK HERE to the ARTICLE

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LATEST MACRO ANALYTICS ON FINANCIAL REPRESSION

 

LATEST UnderTheLens UPDATE ANALYSIS ON FINANCIAL REPRESSION

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FINANCIAL REPRESSION TIMELINE - LONGER TERM

FINANCIAL REPRESSION TIMELINE - NEAR TERM

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2015

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** Current Details Below

CURRENT FINANCIAL REPRESSION INITIATIVES

MONEY MARKET FUND GATES (SEC REGULATIONS)
  • “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 Regime Canada'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."

PENSION CONTROLS

CAPITAL CONTROLS (CASEY RESEARCH ON COMING CAPITAL CONTROLS)

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POLICY CONTROLS (Monetary, Fiscal, Public & Tax Policy)

  • January 2015 Financial Repression - New IMF Paper on The Liquidation of Government Debt New IMF paper by Carmen Reinhart & M. Belen Sbrancia .. presents how public debt is often reduced through the use of financial repression - a tax on bondholders & savers via negative or below market real interest rates .. from abstract:High public debt often produces the drama of default and restructuring. But debt is also reduced through financial repression, a tax on bondholders and savers via negative or below-market real interest rates. After WWII, capital controls and regulatory restrictions created a captive audience for government debt .. Financial repression is most successful in liquidating debt when accompanied by inflation. For the advanced economies, real interest rates were ne gative ½ of the time during 1945–1980. Average annual interest expense savings for a 12—country sample range from about 1 to 5% of GDP for the full 1945–1980 period. We suggest that, once again, financial repression may be part of the toolkit deployed to cope with the most recent surge in public debt in advanced economies."
  • October 2014 - Financial Repression is Very Low Interest Rates for a Very Long Time The 16th annual Geneva Report by the International Centre for Monetary and Banking Studies & written by senior economists including 3 former senior central bankers, predicts interest rates across the world will have to stay low for a "very, very long" time to enable households, companies, & governments to service their debts and avoid another crash .. The report's authors expect interest rates to stay lower than market expectations because the rise in debt means that borrowers would be unable to withstand faster rate rises .. "Global debt-to-GDP is still growing, breaking new highs .. At the same time, in a poisonous combination, world growth and inflation are also lower than previously expected, also – though not only – as a legacy of the past crisis. Deleveraging and slower nominal growth are in many cases interacting in a vicious loop, with the latter making the deleveraging process harder and the former exacerbating the economic slowdown. Moreover, the global capacity to take on debt has been reduced through the combination of slower expansion in real output and lower inflation." 
  • October 2014 - Financial Repression is the likely approach for Governments to pay down debt Great insightful article on financial repression by Daniel Amerman .. questions how the U.S. federal government can pay down its enormous debt .. sees 4 primary options that the government can take: 1) Decades of austerity with higher taxes and lower government spending. 2) Defaulting on government debts. 3) Inflating away the value of the debt through rapidly slashing the value of the currency. 4) Using "Financial Repression", a process that is complex enough that the average voter never understands how it works, thus allowing governments to use this potent but subtle method of taking vast sums of private wealth, year after year, decade after decade, with almost no political consequences. The essay reminds readers the 4th option is the likely approach, points out the world took this approach in the 1940s through the 1970s to pay down government debt .. "Because of the sheer size of the problem – most of the population must be made to participate, year after year. Financial Repression therefore uses an assortment of carrots and sticks to ensure that investors have little choice but to participate – on a playing field that has been rigged against them as a matter of design – even if they are among the small minority who are aware of what is being done to them."The essay covers 4 areas of financial repression: 1) Inflation (Shearing #1)  2) Negative Real Interest Rates (Shearing #2) 3) Funding By Financial Institutions (Fence #1). 4) Capital Controls (Fence #2). 
  • September 2014 - Governments Implementing Financial Repression International Man article on how western world indebted governments need money, how they will protect the big banks at the expense of the citizens with financial repression ..  The International Monetary Fund (IMF) published a horrifying paper, called The Fund’s Lending Framework and Sovereign Debt. That paper in turn was based on one from December 2013, called Financial and Sovereign Debt Crises: Some Lessons Learned and Those Forgotten .. The December 2013 document, right at the start, says that financial repression is necessary: "The claim is that advanced countries do not need to resort to the standard toolkit of emerging markets, including debt restructurings and conversions, higher inflation, capital controls and other forms of financial repression .. As we document, this claim is at odds with the historical track record of most advanced economies, where debt restructuring or conversions, financial repression, and a tolerance for higher inflation, or a combination of these were an integral part of the resolution of significant past debt overhangs." .. The IMF report goes on to say: "Governments can stuff debt into local pension funds and insurance companies, forcing them through regulation to accept far lower rates of return than they might otherwise demand .. Domestic defaults, restructurings, or conversions are particularly difficult to document and can sometimes be disguised as 'voluntary' .. The Fund would be able to provide exceptional access on the basis of a debt operation that involves an extension of maturities .. That means that 30-day notes can be instantly turned into 30-year bonds." - this last sentence means the ability to change 30-day notes into 30-year bonds, effectively holding the money captive for a much longer period of time
  • 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 Repression 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 .. "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.
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    Obama To Unveil Treasury IRAs, Or Planning For A Post-Monetization World
    The Next Shoe To Drop On Your Retirement Account
    Default, Deflation and Financial Repression
    ECB Seriously Considering Negative Interest Rates; New Central Bank Mottos
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    Furious Backlash Forces HSBC To Scrap Large Cash Withdrawal Limit
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    We Are From The Government And We Are Here To Offer You A No Risk, Guaranteed Return Investment Product
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    Theft Is Deflationary - Especially The Crony-CapitalistState Kind
    When Saving Interest Rates Go Negative

REGULATORY CONTROLS & ENFORCEMENT

  • 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:
  • Basel Accord II and III - 05-16-14 Cliff Küle

PUBLIC & PRIVATE PRESSURES & PENALTIES

Placing the Government Debt on the back off Savers & Pensioners

(ie the 75M Baby Boomers About to Retire)

REPORTING DISTORTIONS (Economic & Gov't Statistics)

  • September 2014 - Financial Repression Through Shrinkflation Financial Repression Using Shrinkflation: "As ‘shrinkflation’ becomes no longer viable, it will soon reveal itself in the form of higher consumer prices. And with central banks around the world creating inflation as a policy measure so as to inflate away the world’s massive debt pile, the question remains as to whether the central banks will be able to control this deliberately induced inflation in an environment where ‘shrinkflation’ no longer works."

CAPITAL & FOREIGN EXCHANGE CONTROLS

POLITICAL SUASION (Political Pressures & Quid Pro Quo)

EXPROPRIATION

 

OUR THESIS PAPER

ABSTRACT

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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Neither Gordon T Long nor the FInancial Repression Authority (nor any of its operating entities) is a registered advisor and does not give investment advice. His comments are an expression of opinion only and should not be construed in any manner whatsoever as recommendations to buy or sell a stock, option, future, bond, commodity or any other financial instrument at any time. Of course, he recommends that you consult with a qualified investment advisor, one licensed by appropriate regulatory agencies in your legal jurisdiction, before making any investment decisions, and barring that, we encourage you confirm the facts on your own before making important investment commitments.

THE CONTENT OF ALL MATERIALS:  SLIDE PRESENTATION AND THEIR ACCOMPANYING RECORDED AUDIO DISCUSSIONS, VIDEO PRESENTATIONS, NARRATED SLIDE PRESENTATIONS AND WEBZINES (hereinafter "The Media") ARE INTENDED FOR EDUCATIONAL PURPOSES ONLY.

The Media is not a solicitation to trade or invest, and any analysis is the opinion of the author and is not to be used or relied upon as investment advice. Trading and investing  can involve substantial risk of loss. Past performance is no guarantee of future returns/results. Commentary is only the opinions of the authors and should not to be used for investment decisions. You must carefully examine the risks associated with investing of any sort and whether investment programs are suitable for you. You should never invest or consider investments without a complete set of disclosure documents, and should consider the risks prior to investing. The Media is not in any way a substitution for disclosure. Suitability of investing decisions rests solely with the investor. Your acknowledgement of this Disclosure and Terms of Use Statement is a condition of access to it.  Furthermore, any investments you may make are your sole responsibility. 

THERE IS RISK OF LOSS IN TRADING AND INVESTING OF ANY KIND. PAST PERFORMANCE IS NOT INDICATIVE OF FUTURE RESULTS.

Gordon emperically recommends that you consult with a qualified investment advisor, one licensed by appropriate regulatory agencies in your legal jurisdiction, before making any investment decisions, and barring that, he  encourages you confirm the facts on your own before making important investment commitments.
  

DISCLOSURE STATEMENT

Information herein was obtained from sources which Mr. Long believes reliable, but he does not guarantee its accuracy. None of the information, advertisements, website links, or any opinions expressed constitutes a solicitation of the purchase or sale of any securities or commodities.

Please note that Mr. Long may already have invested or may from time to time invest in securities that are discussed or otherwise covered on this website. Mr. Long does not intend to disclose the extent of any current holdings or future transactions with respect to any particular security. You should consider this possibility before investing in any security based upon statements and information contained in any report, post, comment or recommendation you receive from him.

 

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If you wish to use copyrighted material from this site for purposes of your own that go beyond 'fair use', you must obtain permission from the copyright owner.   

COPYRIGHT  © Copyright 2010-2015 Gordon T Long. The information herein was obtained from sources which Mr. Long believes reliable, but he does not guarantee its accuracy. None of the information, advertisements, website links, or any opinions expressed constitutes a solicitation of the purchase or sale of any securities or commodities. Please note that Mr. Long may already have invested or may from time to time invest in securities that are recommended or otherwise covered on this website. Mr. Long does not intend to disclose the extent of any current holdings or future transactions with respect to any particular security. You should consider this possibility before investing in any security based upon statements and information contained in any report, post, comment or recommendation you receive from him.

 

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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
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HOW IT HAPPENS

"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- Inflation
2- Negative Interest Rates
3- Ring Fencing
4- Obfuscation and Mis-information
 

Posts are A JOINT INITIATIVE OF

GordonTLong.com and CliffKule.com

 
 
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

1- Monetary Policy
2- Distortions - Statistics, Reporting
3- Fiscal Policy - Budget Deficits
4- Moral Suasion - Political Pressures
5- Taxation - ROE, ROI
6-Regulators - Financial Requirements & Enforcement
7- Stealth Credit Spreads
8- Capital Account & Financial Excahnge Controls
PILLARS OF FINANCIAL REPRESSION

"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

THE BUYBACK TAX RUSE Its a Free Tax Ride for Corporations - 07 July 2021

Financial Repression Goes Global - 05 June 2021

 

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

VIDEOS

“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

Monetary Policy Under Financial Repression: China's Long-Term Outlook Financial Sense 20 Dec 2021