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The Financial Repression Authority

MACROPRUDENTIAL POLICY ADVISORS

"Financial repression is not a conspiracy theory, it is rather a collective set of macroprudential policies focused on controlling and reducing excessive government debt through 4 pillars - negative interest rates, inflation, ring-fencing regulations and obfuscation - to effectively transfer purchasing power from private savings." - The Financial Repression Authority

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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 - click on LINK to our Interviews.

 

LINK HERE to our Interviews

How can I Protect from Financial Repression?

 

Last Update:  Wednesday 5/13/15 2:10 PM

   

 

 

Financial Repression in Australia

Will Likely Lead to Investments

in Precious Metals

ABC Bullion Chief Economist Jordan Eliseo essay on the Australian Superannuation industry, & investment in gold & precious metals .. he sees increasing numbers of Australians as choosing to self-direct their retirement portfolios in the direction of physical gold & silver "as a natural choice in a low to negative real rate environment, and as the ultimate portfolio protection in an era of financial repression" .. also he expects at some point for institutional players to eventually adopt a strategic allocation to precious metals .. "Record low bond yields, stretched valuations in certain sectors of the equity market, and the prospect of further interest rate cuts will force these funds in this direction. One need not be a raging gold bull to recognise that a more robust and prudent asset allocation strategy for the coming years simply can’t continue to completely overlook the asset at the bottom of Exeter’s Pyramid."

LINK HERE to the Article or view below

Jordan Eliseo article

 

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The Era of Financial Repression:

Norway's Sovereign Wealth Fund says

Monetary Policy is a Risk to Watch

“Monetary policy does affect pricing in today’s market to such an extent that monetary policy itself has been a risk you have to watch .. Investors are focused more on monetary policy changes than has been generally the case, than at any time, as far as I can remember .. As anything that moves prices is a risk that has to be monitored, here the effects of monetary policy affect prices dramatically .. It’s of course always been the case with long rates, and now more significantly with the currency. That’s just a fact of the current market."

- Yngve Slyngstad, chief executive officer of Norway’s $890 billion sovereign-wealth fund

LINK HERE to the Article

"Financial repression is not a conspiracy theory, it is rather a collective set of macroprudential policies focused on controlling and reducing excessive government debt through 4 pillars - negative interest rates, inflation, ring-fencing regulations and obfuscation - to effectively transfer purchasing power from private savings." - The Financial Repression Authority

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Financial Repression: Negative Interest Rates

Now Happening in Australia ...

Sovereign Man highlights how Australia has gone into negative yields on its government debt: "This is officially now the latest banking fad—buying government bonds at negative yields. You’ll remember a few years ago when the latest banking fad was handing out no-money-down mortgages to dead people and unemployed bus drivers… or buying 'AAA-rated' bonds which pooled these subprime loans together. That didn’t exactly work out so well. Neither will this. In fact there are plenty of similarities between today’s negative interest rates and the early 2000s housing bubble .. Instead of people, though, it’s governments who are effectively being paid to borrow." .. it's all about financial repression

LINK HERE to the Article

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Financial Repression is Leading

to the Death of Money

"Destroying currency amounts to belittling or ending time value, which is a crucial part of gauging and setting risk parameters in the real economy. If there is no time value to money there is essentially no reason to engage in risky behavior. This is what Keynes described as a 'liquidity preference', though for different reasons. Instead of individuals holding too much cash, banks will do so because of that same repression. So at the very least, where the central bank is intent on 'forcing' spending through negatively manipulating the currency, they are at the same time destroying the financial basis to produce credit – all the while herding financial agents into holding even more 'currency' ... How do central banks respond to this? ... By deciding that currency isn’t dead enough."
- Jeffrey Snider

LINK HERE to the Article

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PROPERTY TAXES THE JURISDICTION OF UNDERFUNDED CITIES & TOWNS

"Taxes in Illinois are are already obscene. A homeowner on a $600,000 home can expect to pay $14-15,000 per year - every year on property taxes. Do you really own your own home in Illinois? On top of tht you have 10% sales tax."

"Pensions are so underfunded in Illinois that they are going to go bust in the next slowdown. I believe one (a slowdown) is on the way."

 

THE NEW, LOOMING PROBLEM FOR STATES, CITIES AND TOWNS

Negative interest rates are sweeping the globe. How will states, cities and towns fund themselves and their pension obligations in an era of potential negative nominal bond rates?

  • Returns on the heavily weighted funds' bond holdings are being potentially destroyed , while
  • State bond offerings are likely to face mounting issues around maintaining investor attraction with such monstrous overhang levels of unfunded pension liabilities.

"How will states, cities and towns fund (attract) long term assets with 15 year negative bonds?"

 

 

MISH SHEDLOCK talks

AMERICA'S PENSION PROBLEM

Mish Shedlock talks about the magnitude of the mounting Pension Problem in America and uses his home state of Illinois as a prime example. According to a State Budget Solutions, last year’s state unfunded pensions reached an all-time high of $4.7 trillion. This funding gap state public pension plans are underfunded by $4.7 trillion, up from $4.1 trillion in 2013. Overall, the combined plans' funded status has dipped three percentage points to 36%. Split among all Americans, the unfunded liability is over $15,000 per person.

ILLINOIS' PENDING PENSION CRISIS

"Illinois Pension's in general are 39% funded! This is after this massive rally we have had since 2009 in financial assets. Some of the worst ones are only about 20% funded. I think the Teacher's Pension Plan is about that and the General Assembly and Judicial Pension Plan are also on the bottom."

"Various cities in Illinois have problems, Chicago being one of them. The City of Chicago has a huge pension crisis right now. We have things in Illinois like "Home Rule Taxes" where cities can levy their own taxes in addition to the state. That is why we have varying sales tax that range anywhere from 6% to 10%, depending on locality."

"I believe Chicago is Bankrupt!"

"I have been working with the Illinois Policy Institute. There are a number of cities in Illinois (I am not going to name them), but I am aware of five cities (one of them a major city - not Chicago) that are ready to file bankruptsy - and it is all over the pension issue! The problem is they can't file bankruptcy because the state doesn't allow it."

"The fundamental problem is they have made more promises than they can possibly keep!"

GAMING THE PENSION SYSTEM

The problem is "you have police and fire workers who can retire after 20 years ... and collect up to 70% of their earnings based on the 5 highest years salaries. We see a lot of pension spiking in the last few years where for example police work overtime (which counts towards their best five years) so these workers stand to collect far more in retirement (total years in retirement) than they actually ever made while working (total years worked).

"Tax payers are actually funding the employees portion of the pensions by excessive wages and direct contributions ".

"Chicago (has) floated General Obligation Bonds to actually just fund current expenses. That is illegal! We have bonds here in Illinois that are called tax exempt on the basis they are supposed to be funding long term infrastructure expenses that are funding short term needs."

LINK HERE to the VIDEO

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LINK HERE to enlarge the Above Diagram

"Financial repression is not a conspiracy theory, it is rather a collective set of macroprudential policies focused on controlling and reducing excessive government debt through 4 pillars - negative interest rates, inflation, ring-fencing regulations and obfuscation - to effectively transfer purchasing power from private savings." - The Financial Repression Authority

 

Financial Repression Tutorial:

It's about Macro Prudential Policies to

Control and Reduce Government Debt

Financial Sense's Cris Sheridan interviews Gordon T Long* on financial repression .. Gord explains how financial repression is not about conspiracy theories, nor is there some official government policy for financial repression .. it's happening from macro prudential government policies focused on reducing & controlling government debt .. click on the above chart to enlarge - in the middle you will see the 4 pillars of financial repression - negative interest rates, inflation, ring-fencing regulations & obfuscation .. "Financial repression uses a combination of inflation and government control of interest rates in an environment of capital controls to confiscate the purchasing power of much of the nation's private savings." .. discussion on how to protect your investments in such an environment .. 43 minutes podcast .. courtesy thanks to Financial Sense for making this available

LINK HERE to the Podcast

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The Big Macro Picture of Financial Repression:

"Financial repression is not a conspiracy theory, it is rather a collective set of macroprudential policies focused on controlling and reducing excessive government debt through 4 pillars - negative interest rates, inflation, ring-fencing regulations and obfuscation - to effectively transfer purchasing power from private savings." - The Financial Repression Authority

The chart below shows the linkages and relationships between the good intentions by governments, central banks and regulators translating into the 4 pillars of financial repression - ultimately presenting risks to the investors - savers, retirees, pension funds, endowments and sovereign wealth funds. Link to our ISSUES and SOLUTIONS pages to find out how to address these challenges and protect in this environment.

 

TUTORIAL WITH GORDON T LONG and DOLLARCOLLAPSE'S JOHN RUBINO:

 

 

TUTORIAL WITH FINANCIAL CONSULTANT DAN AMERMAN:

 

TUTORIAL WITH ALLIANZ U.S. CHIEF STRATEGIST KRISTINA HOOPER:

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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.

 

FAIR USE NOTICE  This site contains copyrighted material the use of which has not always been specifically authorized by the copyright owner. We are making such material available in our efforts to advance understanding of environmental, political, human rights, economic, democracy, scientific, and social justice issues, etc. We believe this constitutes a 'fair use' of any such copyrighted material as provided for in section 107 of the US Copyright Law. In accordance with Title 17 U.S.C. Section 107, the material on this site is distributed without profit to those who have expressed a prior interest in receiving the included information for research and educational purposes.

 

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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"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.

"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

"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

"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

“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

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.”