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"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

WHAT ARE THE SOLUTIONS TO FINANCIAL REPRESSION?

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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.

 

 

Last Update:  Monday 6/15/15 4:01 AM

   

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Watch Raoul Pal & Grant Williams

Talk Financial Repression

Global Macro Investor's Raoul Pal and Vulpes Investment Management's Grant Williams discuss essentially what we have classified as the 4 pillars of financial repression: repressed interest rates, forced inflation, obfuscation and ring-fencing regulations. The terms they use are a bit different, but the basic concepts are the same.

They discuss the systemic risks to the financial system including the loss of faith in money itself. They explain how massive money printing has distorted financial markets and prices worldwide, especially through the suppression of bond yields by central bank policies.

They also discuss their suggested solutions to investing in this environment - physical gold held outside of the financial system, cryptocurrencies, assets held outside of the concentration of risk in the financial system, investments in the monsoon regions of the world.

This is a fascinating must-watch discussion which will help you understand what is currently happening in the financial markets, the banking system, the investment world and the global economy.

LINK HERE to the Podcast

If you want to subscribe within the podcast - Apply Our Discount Code - we are partnered with Real Vision TV and we offer the maximum discount you can get anywhere .. Our Discount Code is as follows:   FRA-RV

   

 

Financial Repression on Americans:

Gold-Backed Currencies Available Globally

Except for U.S. Residents

John Rubino highlights the recent emergence of BitGold & its purchase of GoldMoney .. points out this is not the first service or facility of using gold as a payment system - Peter Schiff's Euro Pacific Bank already allows non-U.S. customers to buy gold and/or silver, store it for free at Australia's Perth Mint & then use a debit card to spend it .. Rubino: "Not so long ago the U.S. was where innovations emerged before spreading to the rest of the world. But in the realm of sound money and individual financial freedom at least, this is now Siberia. Foreign banks won’t accept American customers because they’re terrified of IRS agents showing up on their doorsteps with subpoenas. And now gold-backed payment systems that are apparently legal everywhere else are closed to Americans. So we’ll have to watch the merger of sound money and modern technology from the sidelines. Outside the U.S., however, gold-backed currency has the feel of an idea whose time has come. And to repeat an assertion made in yesterday’s piece on BitGold, widespread acceptance of these payment systems might generate a positive feedback loop that sends gold much, much higher. So their success will benefit all owners of precious metals, not just the early account-holders." .. it's financial repression on Americans especially.

LINK HERE to the Article

   

 

LINK HERE to the PODCAST

 

 

JEAN MARIE EVEILLARD

talks FINANCIAL REPRESSION

FINANCIAL REPRESSION

"One characteristic of Financial Repression is extremely low interest rates. That is what the Federal Reserve, ECB and Bank of Japan have done over the past few years in reaction to the financial crisis of 2008. They have in a sense manipulated interest rates by doing what they call Quantitative Easing, which is the purchasing by the central banks of a number of fixed income securities - in the process taking short term interest rates and long term yields down as much as possible. In doing so they are trying to encourage investors but it is of course detrimental to savers!!"

"In a way they are being pushed into equities ... the authorities have created what I think is a bubble in stocks, bonds, high end real estate and art"

REGULATORY "RING FENCING"

"By forcing the banks to inflate their capital, the banks are being forced into buying sovereign securities!".

This type of regulatory policy chicanery helps finance the growing government debt at the expense of savers, retirees and small business. Eventually sovereign economic growth is affected.

NEGATIVE UNINTENDED CONSEQUENCES

There are many unintended consequences and moral hazards of such policies. They lead to mal-investment, lack of price discovery and the mispricing of risk. Jean Marie Eveillard cites "economists have warned about potential mal-investment and today we are right there with the problem .... there is no ambiguity when they say they will do whatever it takes!"

"SAVE & INVESTMENT" VERSUS "LEND & SPEND"

"Today the emphasis of economists is to consume, versus save and invest!"

"Sustained cheap money increases supply much more than it does demand. We presently have over investment resulting in global over supply. This is not being matched by only moderate global demand based primarily on consumerism. This mismatch leads to a lack of pricing power, which eventually defeats policies of Quantitative Easing and ZIRP which were never intended by their academic architects to be sustained policies." Gordon T Long

   

 

 

 

 

LINK HERE to the VIDEO

 

 

 

GLOBAL MINING ANALYST

JAYANT BHANDARI

"Economic Repression is a fact of the day everywhere in the world"

FINANCIAL REPRESSION

"There are two parts of the world in my opinion. One is the western developed civilization and the other is the non-western civilization. The western civilization was primarily based on reason and respect for the individual. This has considerably deteriorated over the last few decades. Increasingly the coming of the police state in particularly the USA. In the West-European part of the western civilization the regulatory controls have become particularly horrendous as well. The welfare system of these economies is deteriorating these societies now. Culturally the western civilizations are increasingly on a slippery slope."

"The non Western civilizations have adopted the consumerism and wealth creating mechanism of the western civilizations, but I am not sure they have really adopted these things properly! Democracy has not done well in these countries. As a result consumerism is making these countries very unstable. The only countries I feel relatively positive about right now are China and some of the smaller countries like Singapore, Hong Kong, Mauritius - these countries are doing very well."

HARD ASSETS & NATURAL RESOURCES

The problem is with the investors who have over-funded mining. They shouldn't have ramped up mining as much as has been done!

'The places to invest are places like Canada, Scandinavia, Australia and parts of South America. You need consistency in the political climate. You want the stability for people to invest billions of dollars in these countries."

"I don't think global demand has fallen. If you look at Iron Ore the world is using three times more Iron Ore. The world requires three times more Iron Ore than it used to 10-15 years ago. What is changed is that we have started to supply more commodities than the world demand is there for it. The problem is with the investors who have overfunded mining. They shouldn't have ramped up mining as much as has been done!

PERVASIVE GLOBAL OVER-REGULATION

"Global western economies are stagnating and this is a direct result of over regulating business in those countries."

"Businesses are suffocating in the west now. There is pretty much zero growth. You need to understand the off balance sheet liabilities these businesses have, and continue to increase. They have benefited from technological evolution and the low hanging fruit over the last twenty years." This has now changed.

The US$ shows that though the US is deteriorating according to Jayant Bhandari "it is deteriorating slower than the rest of the world!"

"Economic repression is a fact of the day everywhere in the world"

Where growth is happening it is because of increasing consumerism and this is not good for the future because growth should be happening as a result of the increase in supply of products - which would mean we should be saving more - which would mean we should be producing more than we are consuming!"

INCREASINGLY BULLISH ABOUT GOLD

"I have never been too bullish about gold but increasingly I am very bullish about gold. The reason is a lot of people misunderstand why Indians buy gold. The reason Indians and Chinese buy so much gold is that for example in India the yield on investment is negative. It pays them to invest in something that gives them positive real yield. In my view India is going to increase its consumption of gold and the Chinese will keep doing it."

"Once the US$ becomes too over-valued people will begin putting their money in precious metals!"

.... and much more in the video interview. Listen to the whole interview.

   

 

The European Union is Rushing

Legislation on Bank Bailins

Michael Snyder highlights what is happening in the European Union - they are rushing legislation (financial repression) for all European Union countries & threatening that if a country does not enact "bailin" legislation within the next 2 months, it will face legal action .. what is a bailin? - it's when creditors like bank depositors or shareholders lose something to help bail out a bank, instead of the government bailing out the bank .. why 2 months? - because you have Greece ready to default & it could send contagion effects all across Europe .. "Greece will only be just the beginning. In the end, I expect major banks to fail all over Europe as we head into the greatest financial crisis that Europe has ever seen. Bank account holders all over the continent could end up having to take 'haircuts', and that would just make the coming deflationary cycle in Europe a lot worse. And I actually expect events in Europe to start accelerating greatly by the end of this calendar year. Apparently the top dogs in the European Union are also concerned about the immediate future, because they are rushing to get 'bail-in' legislation passed in every nation in the EU by the end of the summer."

LINK HERE to the Article

   

 

 

The Lessons on Capital Controls

from Argentina

Sovereign Man explains how Argentina's government is bankrupt & has been implementing countless sets of controls including exchange price controls, media controls, exchange controls & capital controls [financial repression] .. "When governments find themselves in financial trouble because of the stupid decisions that they’ve made, their first response is to award themselves even more power to make even stupider decisions. And among the stupidest decisions that any government can make is imposing capital controls .. something that Argentina has in abundance." .. these capital controls include prohibitions to leave the country with more than U.S.$10,000 in cash & significant paperwork & bureaucracy to wire funds out of the country .. also there is a 30% difference in the official exchange rate with the market exchange rate so that your wired funds leaving the country are effectively 30% less than you think .. "What happens with capital controls: you see a rapid decline in your standard of living as the government traps your savings in a bankrupt system .. It’s like lying on the ground with a blindfold on while the government builds a coffin all around you .. Little by little they fasten together all the sides, and then the top, nail by nail. Capital controls are like a coffin for your savings."

LINK HERE to the Article

   

 

LINK HERE to the VIDEO

 

 

 

PURU SAXENA talks

FINANCIAL REPRESSION

FINANCIAL REPRESSION

"We have been through a huge financial crisis in 2008 which brought the world's banking system to it knees. The US housing market was on it knees. It was the worst recession, if not depression that the US faced in a long time. It affected all the global markets. So rightly or wrongly - wrongly in my view - the central banks decided to bailout everyone in site by keeping interest rates near zero and launching Quantitative Easing programs (which is essentially bond buying or asset swapping) which is printing new money and buying toxic bonds from the banks and thereby cleaning up the banks balance sheets - making sure the banking system survives."

"In the process they have held interest rates at zero for a long long time, not only in the US, Europe and a lot of other countries in the developed world, which is penalizing the savers to the benefit of the borrowers and debtors. They are especially hurting people at retirement or close to retirement because suddenly their passive income which they had worked so hard to accumulate all their life disappears!"

"It is essentially a transfer of wealth from savers to the borrowers and debtors."

"This has managed to stabilize the system temporarily but is really not good for society!"

UNINTENDED CONSEQUENCES

"The problem is everyone has become accustomed to being bailed out! Now there is no such thing as a bankruptcy! Everyone knows (especially the banks), if they make mistakes someone will bail them out either the central banks or the government. It has increased risk taking.

"It has increased risk taking."

"I never felt QE was capable of increasing business activity because this is not really a supply side problem but a demand side problem. You have households all over the world already choking on debt. The last thing they want to do is borrow more money even if you drop rates to zero or give them money to borrow, they just are not going to do it!

A DEMAND PROBLEM

"When people ask why QE hasn't caused inflation or hyperinflation, the answer is simple: households in the west were in no position to borrow money at even zero interest rates. The aggregate demand for new debt or credit was simply not there. By swapping assets the central banks have managed to cleanup the banking system but they have not been able to ignite the risk appetite at the household level".

"We have a Demand problem, NOT a Supply Side problem!"

This is a global problem! "Even in Hong Kong, 2 years ago it was teaming with mainline Chinese tourists which now are simply not coming. Retail sales in Hong Kong have fallen significantly. Spending is hurting as the middle class has been obliterated! The rich have become richer as assets have increased and savers have been penalized. This policy of QE and Financial Repression has really helped the elite of the world - who have had access to financial leveraging."

LOW GROWTH ECONOMIC ENVIRONMENT

The core problem to Puru Saxena is:

  1. The low growth economic environment we find ourselves in,
  2. The deflationary pressures in Europe and Japan

"Historically we have seen, whenever an economy passes through an extremely slow growth, sluggish environment where there is a lack of aggregate demand and you have deflationary pressures, long term interest rates have always gone down. The tendency of long-term interest rates is to drift lower in this environment. Long-term interest rates are normally set by the rate of economic activity as well as the real rate of inflation. At the moment we don't really have much inflation or at least forces on inflation anywhere in the developed world and economic activity is zero or even negative!"

Long-term interest rates are price appropriately for the current economic activity!

There is much, much more in this 31 minute macroeconomic view of the world and the investment opportunities it presents.

   

 

 

Austrian School Economist Carl Menger:

"Money Emerges from a Free Market Economy,

Not From Government Decree"

Dr. Joseph Salerno on The War on Cash

"The free market provides the prospect of an escape from the fiscal police state that seeks to stamp out the use of cash [financial repression] through either depreciation of central-bank-issued currency combined with unchanged currency denominations or direct legal limitation on the size of cash transactions. As Carl Menger, the founder of the Austrian School of economics, explained over 140 years ago, money emerges not by government decree but through a market process driven by the actions of individuals who are continually seeking a means to accomplish their goals through exchange most efficiently. Every so often history offers up another example that illustrates Menger’s point. The use of sheep, bottled water, and cigarettes as media of exchange in Iraqi rural villages after the U.S. invasion and collapse of the dinar is one recent example. Another example was Argentina after the collapse of the peso, when grain contracts priced in dollars were regularly exchanged for big-ticket items like automobiles, trucks, and farm equipment. In fact, Argentine farmers began hoarding grain in silos to substitute for holding cash balances in the form of depreciating pesos."
- Dr. Joseph Salerno, The Mises Institute

LINK HERE to the Article

   

 

 

Mark Thornton on

The True Meaning of Financial Repression

Financial Survival Network interviews Mises Institute's Mark Thornton .. Thornton writes: "With politicians and central bankers seemingly gone mad with their obsession for money printing and ultra low interest rates, it is nice to know that academic economists have a term (i.e., financial repression) for the policies that have created our current economic conditions." .. the term financial repression dates back to 1973 when 2 Stanford University economists - Edward Shaw & Ronald McKinnon .. identifies 2 major macroprudential policies of financial repression in use - ZIRP or zero interest rate policy of central banks to keep interest rates & lending rates at or near 0 - this makes the interest rate on government debt low .. & the second is QE or quantitative easing is the central bank policy of buying up government debt from banks - this increased demand increases the price of government bonds & reduces the interest rates on those bonds .. Take a look at the frescoes Mark refers to in his article and see if you recognize a parallel to modern America: The Allegory of Good and Bad Government .. 20 minutes

LINK HERE to the Podcast

   

 

 

BCA Research Chief Economist Martin Barnes:

"Financial Repression is Here to Stay"

BCA Research's Chief Economist Martin Barnes sees financial repression as "here to stay" for the long-term, given the challenges of low economic growth & high debt globally .. Barnes has written a special report to explain why debt burdens are moe likely to rise than fall over the short & long run given demogaphic trends & the low odds of another economic boom .. BCA Research: "If governments cannot easily bring debt ratios down to more sustainable levels, then the obvious solution is to make high debt levels easier to live with. This can be done be keeping real borrowing costs down and by regulatory pressures that encourage financial institutions to hold more government securities. In other words, financial repression is the inevitable result of a world of low growth and stubbornly high debt. Martin argues that central banks are not overt supporters of financial repression, but they certainly are enablers because they have no other options other than to keep rates depressed if they cannot meet their growth and/or inflation targets. A world of financial repression is an uncomfortable world for investors as it implies continued distortions in asset prices, and it is bound to breed excesses that ultimately will threaten financial stability."

LINK HERE to the Article & Link to Report

   

 

 

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

   

 

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

   

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.

 

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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.”