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FINANCIAL REPRESSION SERIES
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Last Update:  Tuesday 7/14/15 10:42 AM

   

 

 

 

LINK HERE to the VIDEO

 

 

JOSEPH SALERNO on

Bail-ins & "The-War-on-Cash"

Professor Joseph Salerno is a noted Austrian Economist who spoke with the Financial Repression Authority on Financial Repression and his growing concerns with what is referred to as "the War-On-Cash", which he sees leading America and other developed countries in the wrong direction. He sees it as presently gaining momentum in senior policy levels around the world as global debt problems become more acute.

FINANCIAL REPRESSION

"A combination of Deliberate Inflation and very low Interest Rates. Interest rates which are kept low by a variety of what are called "Unconventional Monetary Policies".

"There is talk now of having:

  • Negative Nominal Rates,
  • Governments taking over Pension Funds,
  • Varies 'privileging' of government debt as part of bank capital.

... so it (Financial Repression) is a series of interferences in the financial markets by government with the end being to push interest rate lowers so they can inflate away their debt! They do that by having interest rates even lower than the rate of inflation."

"What Financial Repression does is transfer surreptitiously resources and coming wealth from savers and retirees to the government and its crony banks. I think it exists, it is dangerous and I think many people are being hurt by it!"

WAR-ON-CASH - GETTING TO NEGATIVE NOMINAL BOND RATES

Professor Salerno believes the government wants Negative Nominal Rates but as he points out: "The only way they can do that is to lock peoples deposits into the banking system - that is where the War-on-Cash comes in! They would love to restrict or even abolish the use of cash within the United States if they could. That means they would have to use deposits."

"This is another way of propping up a very unsound and dangerously flawed banking system!"

Professor Salerno has spoken out extensively on this subject, most recently at the Mises Circle event in Stamford, Connecticut

Governments, at least modern western governments, have always hated cash transactions. Cash is private, and cash is hard to tax. So politicians trump up phony reasons like drug trafficking and money laundering to win support for bad laws like the Bank Secrecy Act of 1970, which makes even small cash transactions potentially reportable to the Feds.

Today cash is under attack like never before. Ultra low interest rates are the norm for commercial bank accounts. In Europe, as the ECB ventures into negative nominal interest rates, certain banks threaten to charge customers for depositing cash. Meanwhile, certain European bonds now pay negative yields, effectively turning them into insurance products rather than financial assets. And some economists now call for the outright abolition of cash, which shows just how far some will go in their crazed belief that economic prosperity can be commanded by forcing us to spend rather than save.

The War on Cash is real, and it will intensify. 

PUBLIC FOREIFEITURE

Both bank deposits and withdrawals of cash are now carefully scrutinized by banks and police agencies across America. Safety deposit boxes are seeing increasing restrictions on what can be held in them in the way of cash. People depositing cash often find themselves facing public asset forfeitures and seizures by the police. In some cases when cleared as being innocent then have serious difficulty in getting their seized assets returned. Professor Salerno expounds on this and other troubling new developments in America.

....there is much, much more in this fact filled 29 minute Video.

 

   

 

ACCUMULATION OF DEBT

Debt levels are now at critical levels:

    • Excess accumulation of debt has become a critical burden to the productive capacity of the global economy,
    • Significant levels of global investment is presently malinvestment,
    • Excess global capacity has been used to produce none-productive assets,
    • Lack of Price Discovery and Mispricing of Risk are distorting economies and investment behavior,
    • Many parts of the economy are fragile and a recssion is now knocking on the door of the US,
    • .... and more

AUSTRIAN PRESCRIPTION

    • The Federal Reserve needs to get out of the interest rate markets and allow the markets to work properly,
    • The Federal Government needs to balance budgets and cut back spending tremendously,
    • The Government needs to signal to markets particpants that they are not going to see their taxes increased significantly,
    • The Government needs to demonstrate they are going to do something about the national debt and unfunded liabilities.

    These policy positions would begin to incent investment very quickly.

The Central Problem is Unsound Money

 

 

MARK THORNTON PhD talks

FINANCIAL REPRESSION

FINANCIAL REPRESSION

"A financial scam of the government over the private economy ... It is aimed at taking advantage of their citizens, savers and investors."

Government authorities are:

  • Printing money,
  • Issuing enormous amounts of debt,
  • Suppressing interest rates,

.. all with the intention of exploiting the worker and inflating the value of the goods they buy, as wages fail to keep up. Savers are now receiving negative real rates of returns which is the government extracting resources for themselves at the expense of the common man.

WAGING WAR ON SAVERS

WINNERS: The policies of Financial Repression help:

  • Banks
  • Large Corporations,
  • Government,
  • Large Borrowers,

LOSERS: The losers are:

  • Savers,
  • Consumers,
  • Producers,
  • Laborers,
  • Entrepreneurs

POLICIES: The world wide economy is suffering as a result of the policies which include:

  • Inflation,
  • Zero Interest Rates
  • Quantitative Easing,
  • Heavy Regulation (Healthcare and Banks)

This is an enormous problem in the modern context.

LINK HERE to the Interview

 

LEGAL PRIVILEGE

"Under a fiat money standard, governments (or their central banks) may obligate themselves to bail out, with increased issues of standard money, any bank or any major bank in distress. In the late nineteenth century, the principle became accepted that the central bank must act as the "lender of last resort", which will lend money freely to banks threatened with failure. Another recent American device to abolish the confidence limitation on bank credit is "deposit insurance", whereby the government guar­antees to furnish paper money to redeem the banks’ demand li­abilities. These and similar devices remove the market brakes on rampant credit expansion.

According to Hülsmann, there are four groups of legal privileges granted by the state (usually more than one is granted):

  • Legalized Counterfeiting - the promises of banks are allowed to be more "elastic". For example, a coin marked "an ounce of gold" will be allowed to have any amount of gold or none, and can have any meaning. Banknotes were named "promises to pay", but were obscure on the details.
  • Monopoly - only some monetary products may be produced by law, like a specific metal; or only the banknotes or coins of a certain bank. This limits the freedom of choice of users of money and benefits the producers and first recipients at the detriment of others.
  • Legal Tender is a money, that must be accepted in exchanges under a predefined price. Some monies may be driven out of the market due to Gresham's Law.
  • Legalized Suspension of Payments allows banks to avoid paying their obligations, while receiving payments from their debtors. If a bank is freed from contractual obligations to redeem its money and it is also legal tender, its banknotes become genuine paper money.

With legal privileges the banks are allowed to behave more irresponsibly, which increases moral hazard.

PERMANENT POSITIVE PRICE INFLATION RATE

"Without a Fiat Currency system it is impossible to create a permanent positive price inflation rate. With the gold standard the tendency for the price level was generally deflationary... a constantly declining price levels."

"If you have declining prices then there is a very strong incentive for savers to not worry about any financial investments at all, but to just save in the form of cash ... when you have constantly increasing prices... holding cash becomes suicidal for savers. You then have only two choices. Buy Real Estate or Financial Titles. You get promises of remuneration for your savings so you are partially compensated for the lose of purchasing power."

"Deflationary Recessions are a healing process - it is what precisely gets the economy back in touch with the real world and allow you to move forward event more forcibly!

 

Please link to the page of our Austrian research seminar:

AND ask your readers to get in touch with me (jgh@guidohulsmann.com) to make a donation. All donations are tax-deductable.

 

 

 

PROFESSOR GUIDO HULSMANN talks

FINANCIAL REPRESSION

FINANCIAL REPRESSION

"Financial Repression is the name we give to all the different government interventions in which governments seek to improve their own bargaining position with financial markets."

"As a consequence of Financial Repression (that is of government intervention) people use their savings differently than they would otherwise have used. Therefore different people benefit from those savings (most probably the government itself) to a greater extent than otherwise would have been the case."

FINANCIAL REGULATION

"The most surprising developments have been regulation, like the Dodd-Frank Act, Basel III, FATCA. They are pretty intrusive. These regulations have been sold to the public as necessary to control the financial markets, which is certainly the case but this is one side, the other is precisely the cause. Governments control the markets and can force Insurance Companies, Banks, Investment Trusts to use their funds in a certain way that governments are then ready to benefit from. This is very often at the expense of the savers."

EXPECTED TRENDS

INCREASED REGULATIONS

The amount of paperwork and red tape that will be required to comply with expanding regulations is already growing dramatically. "We already require by law in Europe, for example, for an Investment Fund to have a Risk Officer who reports directly to the Ministry of Finance. It is absolutely mind boggling and it makes it very difficult for people to continue doing business profitably - it makes it quite miserable unless you are a big firm!" "These rules boil down to squeezing all small and even medium sized businesses out of business!"

'FORCED LENDING TO THE STATE OF FORCED SAVINGS'

"I expect a trend that will become much larger and more important in the future is what I call "Forced Lending to the State of Forced Savings!" Professor Hulsmann sees Pensions as being a particularly attractive target for this sort of trend.

PRICE RIGGING

We have already seen this most evidently in the area of Precious Metals price rigging. "This is because they are the natural alternative to hold savings outside of Financial Markets and Real Estate Markets! Both are artificially bloated thanks to central bank policy."... "it is natural that people turn to Precious Metals because there is no counterparty risk".

 

LINK HERE to the video

 

   


 

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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.

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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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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
3- Interest rate ceilings
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