11/13/2014 - “WE’RE GOING TO BE FINANCIALLY REPRESSED FOR DECADES!”
Bill Gross, the 69-year-old billionaire co-founder of Pacific Investment Management Co., told Bloomberg Radio – AUDIO
Feeble returns on the safest investments such as bank deposits and fixed-income securities represent a “financial repression” transferring money from savers to borrowers, says Bill Gross.
Workers 65 and older, struggling with years of depressed yields, are the only group of Americans who are increasingly employed or looking for jobs, according to Labor Department participation-rate data.
Federal Reserve interest-rate policy that aims to cut borrowing costs. “I hate to be gloomy, but, yes, for the next 10 years, the oldsters, and I’m in that camp, are going to be disappointed in terms of the policy rate.” About 75 million baby boomers, born from 1946 to 1964, are starting to retire and face meager returns as a byproduct of the Fed’s decision to hold its benchmark rate near zero since December 2008. Policy makers also have quadrupled the central bank’s balance sheet to a record $4.22 trillion to drive down borrowing costs.
LETTER: FEDERAL GOVERNMENT ‘AGGRESSIVELY ENGAGED’ IN FINANCIAL REPRESSION 11-02-14
The $17.5trillion recognized federal government debt is one of the prime reasons why so many Americans, especially seniors, are having trouble making ends meet and why many of the young can’t save.
What’s happening is that since 2008, Washington has been aggressively engaged in a process called financial repression.
Financial repression is a deliberate policy by which deeply indebted governments, like ours, have historically used to discharge their otherwise unpayable debt. It’s a combination of chronic inflation coupled with artificially imposed low interest rates. What this effectively does is transfer wealth from savers to government.
One of the beauties of financial repression from Washington’s perspective is that it’s complex enough that the average person doesn’t understand how it works. This allows the government to keep taking vast sums of private wealth year after year without having to suffer any political consequences. That is, those in power stay in power.
Since the financial crisis of 2008, financial repression has been responsible for the yearly stealth transfer of hundreds of billions of dollars from the private sector to Washington.
The rationale is that it’s better to take something from everyone to resolve the financial predicament which the government regards as a societal problem.
One of the negatives of this hidden tax is that the prudent saver is punished. Another drawback is that financial repression makes it very difficult for people to save and thus accumulate some wealth.
I have been following events since the 1970s, and one of the things that stand out for me is the cavalier and even reckless ways in which government spends money. No responsible person would ever run their household the way politicians have run the government. So now we’re paying the piper for our collective spendthrift ways.
Peter Skurkiss, Stow
