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2012 Financial RepressionRestricted & Confidential

Copyright 2011 © Gordon T. Long All Rights Reserved general@GordonTLong.com

FINANCIAL REPRESSION

Crony Capitalism - Global Rebalancing - Statism

Release 1.0 Version 2.0

Through the Process of Abstraction the 2012 Thesis outlines how the GlobalMacro is presently on a well defined path towards a global Fiat Currency Failureand the emergence of a New World Order. 2012 will be highlighted by socialunrest during a period of heightened conflict and tension. As economic growthdeclines and chronic unemployment becomes even more broad based on theworld stage, Macro Prudential Policies of Financial Repression will accelerate.Increasing centralized planning and control by sovereign government willfurther push advanced societies towards collectism and statism.

Gordon T Long1/14/2012

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2012 Thesis: Financial RepressionRestricted & Confidential


FINANCIAL REPRESSION

Crony Capitalism - Global Rebalancing - Statism

Table of Contents

2012 THESIS

............................................................................................................................................................................................... 6

INTRODUCTION

.............................................................................................................................................................................................. 6

FINANCIAL CRISIS (2007-2010), ECONOMIC CRISIS (2010-2011), POLITICAL CRISIS (2012)

.............................................................................. 7

WEALTH TRANSFER - THE PROVEN GOVERNMENT FORMULA

............................................................................................................................. 10

END GAME

............................................................................................................................................................................................................................ 11

THE UNFOLDING STRATEGY THAT GOT US HERE

.................................................................................................................................................... 15

POWER SHIFT - INDIVIDUALISM versus COLLECTIVISM

............................................................................................................................................ 20

FINANCIAL

REPRESSION

........................................................................................................................................................................... 21

SIMPLFYING THE COMPLEXITY

....................................................................................................................................................................................... 21

LIQUIDATION OF GOVERNMENT DEBT

......................................................................................................................................................................... 22

THE LOST DECADE

............................................................................................................................................................................................................. 23

UNDERSTANDING FINANCIAL REPRESSION

............................................................................................................................................................... 27

TOOLS - APPLICATION & SEQUENCE

............................................................................................................................................................................ 29

CONSUMER PRICE INDEX (CPI)

................................................................................................................................................................................... 30

TOOL #1: MANAGED INFLATION EXPECTATIONS.

.................................................................................................................................................. 31

TOOL #2: INTEREST RATE DERIVATIVE SWAPS

..................................................................................................................................................... 33

TOOL #3: ZERO INTEREST RATE POLICY (ZIRP)

..................................................................................................................................................... 34

TOOL #4: QUANTITATIVE EASING (QE)

...................................................................................................................................................................... 34

TOOL #5: REPO DURATION

........................................................................................................................................................................................... 36

TOOL #6: OPERATION TWIST

....................................................................................................................................................................................... 36

TOOL #7: INFLATION TARGETING

............................................................................................................................................................................... 37

CRONY

CAPITALISM

.................................................................................................................................................................................... 38

CORPORATOCRACY & CRONY CAPITALISM

............................................................................................................................................................... 38

LOBBYING - A "DISTINCTIVE COMPETENCE"

............................................................................................................................................................... 44

COPORATOCRACY'S BIGGEST CONCERN

................................................................................................................................................................... 58

DEMOCRATIC CORRUPTION

............................................................................................................................................................................................ 59

GLOBAL

RE-BALANCING

............................................................................................................................................................................ 61

REDUCED STANDARDS OF LIVING

................................................................................................................................................................................. 64

SOCIAL

UNREST

........................................................................................................................................................................................... 67

ARAB SPRING - EU SUMMER - AMERICAN AUTUMN > WORLD WINTER

............................................................................................................. 67

GROWTH - JOBS - DISPOSABLE INCOME

..................................................................................................................................................................... 67

DISPARITY, UNFAIRNESS, CORRUPTION

..................................................................................................................................................................... 74

STATISM

......................................................................................................................................................................................................... 76

ANGLO-AMERICAN AXIS

.................................................................................................................................................................................................... 76

CRONY CAPITALISM -> CORPORATOCRAY -> FASCISM

.......................................................................................................................................... 77

GLOBAL GOVERNANCE FAILURE

................................................................................................................................................................................... 93

DYSTOPIA

.............................................................................................................................................................................................................................. 94

2012

BIBLIOGRAPHY

.................................................................................................................................................................................... 96

INTEGRATION - 2010, 2011 THESIS

......................................................................................................................................................97

UNFOLDING

DOMINANCE

OF

FINANCIAL

REPRESSION

&

STATISM

............................................................................................... 97

SITUATIONAL ANALYSIS

.................................................................................................................................................................................................. 103

IN A BOX

.............................................................................................................................................................................................................................. 105

DEATH OF SHADOW BANKING; BIRTH OF QE

x

.......................................................................................................................................................... 107

PROCESS

OF

ABSTRACTION

.................................................................................................................................................................. 112

ABSTRACTION & SYNTHESIS

......................................................................................................................................................................................... 112

AGE OF RAGE

.................................................................................................................................................................................................................... 113

CORPORATOCRACY & NEW WORLD ORDER

............................................................................................................................................................ 114

FIAT CURRENCY FAILURE & NEW RESERVE CURRENCY

...................................................................................................................................... 115

GLOBAL

MACRO

OUTLOOK

..................................................................................................................................................................... 116

GLOBAL IMBALANCES

..................................................................................................................................................................................................... 118

ENTITLEMENTS & COLLAPSING WESTERN SOCIAL NET

....................................................................................................................................... 120

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2012 Thesis: Financial RepressionRestricted & Confidential


REGIONALIZATION & EMERGING MARKETS

.............................................................................................................................................................. 122

US

ECONOMIC

OUTLOOK

........................................................................................................................................................................ 123

ECONOMIC DRIVERS

....................................................................................................................................................................................................... 123

ECONOMIC ROADMAP - 2011-2013

............................................................................................................................................................................... 124

BEGGAR-THY-NEIGHBOR POLICY

................................................................................................................................................................................ 124

TIPPING POINTS

..................................................................................................................................................................................... 129

2012

CHANGES

OF

SIGNIFICANCE

........................................................................................................................................................ 129

THE

YEARS

MAJOR

SHIFTS

..................................................................................................................................................................... 129

TIPPING

POINTS

SUMMARY

TABLE

....................................................................................................................................................... 130

HIGHLIGHT

TABLE

...................................................................................................................................................................................... 133

LEVEL

I

-

R

ED

C

ONCERNS

............................................................................................................................................................................ 148

SOVEREIGN DEBT

............................................................................................................................................................................................................. 148

EU BANKING CRISIS

......................................................................................................................................................................................................... 151

RISK REVERSAL

................................................................................................................................................................................................................ 155

US STATE & LOCAL GOVERNMENT

.............................................................................................................................................................................. 158

FOOD PRICE PRESSURES

.............................................................................................................................................................................................. 159

RISING INFLATION PRESSURES & INTEREST RATES

............................................................................................................................................. 163

SOCIAL UNREST

................................................................................................................................................................................................................ 167

CHRONIC UNEMPLOYMENT

........................................................................................................................................................................................... 171

CHINA BUBBLE

................................................................................................................................................................................................................... 174

LEVEL

II

-

A

MBER

C

ONCERNS

....................................................................................................................................................................... 176

GEO-POLICAL EVENTS

.................................................................................................................................................................................................... 176

RESIDENTIAL REAL ESTATE - PHASE II

...................................................................................................................................................................... 178

COMMERCIAL REAL ESTATE

......................................................................................................................................................................................... 182

PUBLIC POLICY MISCUES

............................................................................................................................................................................................... 185

OIL PRICE PRESSURES & PEAK OIL

............................................................................................................................................................................ 191

BOND BUBBLE

.................................................................................................................................................................................................................... 196

PENSION ENTITLEMENT CRISIS

.................................................................................................................................................................................... 199

CENTRAL & EASTERN EUROPE

.................................................................................................................................................................................... 203

US BANKING CRISIS II

...................................................................................................................................................................................................... 207

LEVEL

III

-

D

ARK

G

REY

C

ONCERNS

............................................................................................................................................................. 213

CREDIT CONTRACTION II

................................................................................................................................................................................................ 213

JAPAN DEBT DEFLATION SPIRAL

................................................................................................................................................................................. 216

FINANCE & INSURANCE BALANCE SHEET WRITE-OFFS

........................................................................................................................................ 219

US STOCK MARKET VALUATIONS

................................................................................................................................................................................ 220

GOVERNMENT BACKUP INSURANCE

.......................................................................................................................................................................... 224

LEVEL

IV

-

L

IGHT

G

REY

C

ONCERNS

............................................................................................................................................................. 228

SHRINKING REVENUE GROWTH RATE

....................................................................................................................................................................... 228

GLOBAL OUTPUT GAP

..................................................................................................................................................................................................... 229

US DOLLAR WEAKNESS

.................................................................................................................................................................................................. 231

US RESERVE CURRENCY STATUS

............................................................................................................................................................................... 234

PUBLIC SENTIMENT & CONFIDENCE

........................................................................................................................................................................... 235

SLOWING RETAIL & CONSUMER SALES

..................................................................................................................................................................... 238

NORTH & SOUTH KOREA

................................................................................................................................................................................................ 240

US FISCAL, TRADE & CURRENT ACCOUNT IMBALANCES

...................................................................................................................................... 241

CORPORATE BANKRUPTCIES

....................................................................................................................................................................................... 243

TERRORIST EVENT

........................................................................................................................................................................................................... 244

FINANCIAL CRISIS PROGRAM EXPIRATION

............................................................................................................................................................... 244

IRAN NUCLEAR THREAT

.................................................................................................................................................................................................. 245

NATURAL PHYSICAL DISASTER

.................................................................................................................................................................................... 245

PANDEMIC / EPIDEMIC

..................................................................................................................................................................................................... 246

ABSTRACTIONS

..................................................................................................................................................................................... 247

DEBT

SATURATION

&

DEFAULT

............................................................................................................................................................. 247

SOCIAL

UNREST

......................................................................................................................................................................................... 255

GEO-POLITICAL

TENSIONS

..................................................................................................................................................................... 259

REGIONALIZATION

..................................................................................................................................................................................... 262

RESOURCE

SHORTAGES

......................................................................................................................................................................... 266

EMERGING

MARKETS

............................................................................................................................................................................... 273

SYNTHESIS

............................................................................................................................................................................................. 277

BANKING

&

CREDIT

CRISIS

II

................................................................................................................................................................... 277

BEGGAR-THY

NEIGHBOR

&

CURRENCY

WARS

................................................................................................................................. 279