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SUBSCRIBER ACCESS - THESIS 2015

     

|| FINANCIAL REPRESSION INTERVIEWS ||  FINANCIAL REPRESSION MEDIA ||

The Financial Repression Authority

Investments of any kind involve risk.  Please read our complete risk disclaimer and terms of use below by clicking HERE

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Dear Reader, 
Please find below our posts from this week. We hope you find them insightful and informative. Check out our many interviews with key industry analysts, economists and fund managers. We are now focusing on doing interviews which highlight the key issues of financial repression and the solutions which make sense to the investment challenges of this environment. Stay tuned with us on our website and social media …

 

LINK HERE to our interviews

 

Last Update:  Wednesday 5/13/15 2:08 PM

   

 

DOUBLE FINANCIAL REPRESSION

Simply put, financial repression means that savers are not adequately compensated for their savings. “The Indian banking system is afflicted by what might be called ‘double financial repression’.

Financial Repression on the Asset side of the balance sheet

Financial repression on the asset side of the balance sheet is created by the statutory liquidity ratio (SLR) requirement that forces banks to hold government securities, and priority sector lending that forces resource deployment in less-than-fully efficient ways.

Financial Repression on the Liability side

Financial repression on the liability side has arisen from high inflation since 2007, leading to negative real interest rates, and a sharp reduction in households’ financial savings,” noted the Economic Survey 2014-15.

In a 2012 National Bureau of Economic Research paper, Debt Overhangs: Past and Present, Carmen M. Reinhart, Vincent R. Reinhart and Kenneth S. Rogoff noted:

“Financial repression includes directed lending to the government by captive domestic audiences (such as pension funds or domestic banks), explicit or implicit caps on interest rates, regulation of cross-border capital movements, and a tighter connection between government and banks, either explicitly through public ownership of some of the banks or through heavy ‘moral suasion’.”

 

 

FINANCIAL REPRESSION IN INDIA

Savings are important for an economy to be able to invest and grow at a healthy pace. Household sector is an important contributor to savings in an economy. However, in India, savings in the household sector has declined significantly in recent years and has come down from the level of 25.2% of the gross domestic product (GDP) in 2009-10 to 17.8% of the GDP in 2013-14. Financial savings in the household sector also declined from 12% of GDP to 7.2% during the same period. Although savings in physical assets went up from the level of 13.4% of GDP in 2004-05 to 15.8% in 2011-12, it also declined thereafter along with overall savings rate. The decline in financial savings is a matter of concern for policymakers as it can affect growth potential. One of the biggest reasons for the decline in savings rate, and in financial savings in particular, is attributed to financial repression.

SLR (STATUTORY LIQUIDITY RATIO) REQUIREMENTS

In India SLR requirements mandate banks to hold certain types of assets, such as government bonds, which suppress the real interest rate in the marketplace.

“The SLR is a form of financial repression where the government pre-empts domestic savings at the expense of the private sector. Real interest rates are lower than they would be otherwise,” said the Economic Survey.

Through SLR requirements, banks are used as captive investors in government bonds, which allows the government to finance its fiscal deficit at a relatively lower cost. The Reserve Bank of India in recent times has gradually reduced the SLR requirement for banks from 25% to 21.5% of demand and time liability. While it will take some time for the central bank to bring down this requirement, which will lead to better discovery of interest rates, the current higher real interest rates due to lower inflation is widely expected to boost financial savings.

LINK HERE to the Article

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"A Time of Unprecedented

Financial Repression"

"We live in a time of unprecedented financial repression. As I have continued writing about this, I have become increasingly angry about the fact that central banks almost everywhere have decided to address the economic woes of the world by driving down the returns on the savings of those who can least afford it – retirees and pensioners."

- John Mauldin

LINK HERE to the Article

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GOVERNANCE PROBLEMS

"There is a huge problem with the Public Pension Funds in the United States. The problem focuses around the governance model. It is all wrong! They have way too much political interference. They don't have proper pension fund plan managers that can take internal actions, lower the costs of the funds and ... match assets with liabilities"

"The US needs to consider privatizing Social Security and creating independent investment boards."

"What is going on in the US right now is you have a lot of investment consulting shops that are typically forcing these public pension funds to invest in very high fee, high risk private equity / hedge funds. That is fine for the Private Equity Funds and Hedge Funds but it is not in the best interest of these public pension funds. I don't think it is. As a matter of fact I know it is not!"

"The US really needs to reform its Public Pension Plans. To introduce shared risk models so that the risk of the plan is shared between the stakeholders (i.e. the employees), the government and the pension. They need to reform the governance so they start to pay the pension plan managers properly to manage more and more of the assets internally".

"Pension Investments Are Fueling Inequality! The migration of Pension Plans to Alternative Investments such as Private Equity / Hedge Funds are contributing to the growth in Inequality"

 

 

 

 

PENSION PULSE talks PENSION POVERTY

Leo Kolivakis brings a unique perspective to Pensions having worked on both the Buy & Sell side as a Pension Plan analyst.

TITANIC GLOBAL BATTLE

Kolivakis sees a titanic battle going on around the world between Inflation & Deflation with the world shifting due to demographics, private / public debt problems and a global jobs crisis. As a result he sees bond yields falling because it is resulting in no inflation. "The bond market is rightly concerned about tight fiscal policy and austerity in a world of low growth, low inflation (possibly deflation) for a prolonged period of time". "I am more worried about what is going on in China .. if you have a boom-bust scenario in China, the potential to import deflation (ie through lower goods prices, currency devaluation etc) is a significant concern".

PENSIONS IN PERIL

"I believe there is a Private and Public Pension Crisis in America that needs to be openly discussed by US citizens & politicians. The private savings crisis in America shows the median 401K balance is under $20,000 and somewhere around $76,000 for people 60-65 years of age. That is definitely not enough money to retire comfortably for the rest of your life!"

"In the private sector where corporations are cutting defined benefit programs and going to low cost defined contribution plans, there is another crisis happening." People are being forced to take on the responsibility of pension investment management decisions.

"Individuals are now caring the risk of their retirement!"

"What people don't realize is the shift to Defined Contributions is very deflationary. People simply don't spend as much as they do on Defined Benefits when they have known fixed incomes."

PENSION POVERTY

  1. DEFINED BENEFITS - A massive underfunding problem between $7 - $10T
  2. CONTRIBUTORY BENEFITS - Median 401K Levels of $18,400 are 'orders of magnitude' short,
  3. SELF FUNDING - IRA and Roth Plans are not earning the levels of income required for retirement. Market draw-downs have seriously impaired long term growth,
  4. SAVINGS RATES - Falling Real Disposable Income is increasingly limiting already extremely low personal savings rates.

LINK HERE to the VIDEO

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"Capital controls are used by many countries and come in all sorts of shapes, sizes, and labels. The purpose, however, is always the same: to restrict and control the free flow of money into and out of a country so that the politicians have more wealth at their disposal to plunder."

 

 

Capital Controls in the form of "PFIC"

Passive Foreign Investment Company

International Man's Nick Giambruno explains the difficulty for Americans abroad to invest in non-U.S. based investments .. in this case it is called Passive Foreign Investment Company (PFIC) - the could be "foreign" mutual funds or "foreign" stocks

"the complexity of the paperwork for Americans to file when investing in PFIC makes it so onerous & legally prone to risk that it is effectively just not worth it & outright dangerous for Americans to do so - as such, the U.S. is effectively "forcing" Americans to keep their money at home & invested in U.S.-based investments"

Taking a step back and looking at the big picture, it’s clear the PFIC rules are part of the long-term trend of the U.S. government using burdensome regulations to effectively shrink the number of options available for those seeking to diversify internationally. These roadblocks are a clue as to how desperate and bankrupt it really is.

You shouldn’t be deterred, as that is exactly what the politicians want to happen. They prefer your savings remain within their immediate reach so that it’s easier to fleece."

LINK HERE to the Article

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Financial Repression Wealth Confiscation:

Bailin Ahead for Greece?

"The loans to Greece by the ECB have been increasing, so the ECB has been increasing its credit exposure to that country. Second, the deposit runs that are occurring in the Greek banks have been accelerating over the past three months and they continue as we speak. So you have these two lines converging. The ECB is never going to allow those two lines to cross because if they did the ECB’s credit exposure would be larger than the amount of deposits in the Greek banking system. And if that were to occur, the ECB would never be able to get its loans to Greece repaid. When Cyprus failed, they (Western central planners) said that bank bail-ins were going to be the blueprint for other countries. And we have to look at what happened in Cyprus and apply it to Greece. When those two lines were converging in Cyprus, the ECB, IMF and the EU basically took over and nationalized two of the Cypriot banks — took the deposits out of those Cypriot banks and used those deposits to repay the ECB loans to Cyprus. So the same thing is going to be happening to Greece. The ECB is going to take the deposits out of the Greek banks and use those to repay all of the loans that the ECB has made to Greece. .... I think we should be worrying about whether this is going to be happening over this weekend."

- James Turk

LINK HERE to the Article

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FINANCIAL REPRESSION INDEX

Swiss Re's FINANCIAL REPRESSION INDEX demonstrates that mainline investment institutions are beginning to see what the FINANCIAL REPRESSION AUTHORITY has been shouting for some time!

 

LINK HERE to get the Swiss Re Report

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Financial Markets Timing Indicator

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Securely Store it in

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The Big Macro Picture of Financial Repression:

 

 

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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** 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.
  • MyRA
    MyRA - More About Getting Votes Than Helping Middle Class
    The Three Stooges Debunk myRA - Zero Hedge
    The MyRA Propaganda Begins A Start To A Secure Retirement Promises Treasury Secretary
    .
    .
    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
    First It Was Bail-Ins And Now EU Sees “Personal Pension Savings” As “Plug” For Banks
    Furious Backlash Forces HSBC To Scrap Large Cash Withdrawal Limit
    .
    .
    We Are From The Government And We Are Here To Offer You A No Risk, Guaranteed Return Investment Product
    .
    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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TERMS OF USE

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.
  

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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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"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

The 4 Pillars of Financial Repression:

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

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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