1
 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
 
 
2
 2012 Thesis: Financial RepressionRestricted & Confidential
 
Copyright 2011 © Gordon T. Long All Rights Reserved general@GordonTLong.com
 
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 
.......................................................................................................................................................... 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
 
 
 
3
 2012 Thesis: Financial RepressionRestricted & Confidential
 
Copyright 2011 © Gordon T. Long All Rights Reserved general@GordonTLong.com
 
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
 
 
ED 
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 
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
 
 
ARK 
REY 
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 
REY 
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
 
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