Financial repression, misinformation increasingly the principal tools of central banks

SOURCE: FINANCIAL POST: MidasLetter | August 22, 2016

Wading through the muddle of the United States Federal Reserve Bank’s minutes from the last Federal Open Market Committee meeting released on Wednesday, August 18, 2016, is not light summer reading. The text is rife with windy, repetitious, looping jargon that requires reading and re-reading.

Financial repression, or the practice by governments and their agents of reducing government debt by reducing interest rates paid to savers and devaluing currency over longer terms essentially shifts the burden of repayment onto the backs of the public. First described by economists Carmen Reinhart et al in a paper entitled “The Liquidation of Government Debt“, financial repression is described thus: “Financial repression includes directed lending to government by captive domestic audiences (such as pension funds), explicit or implicit caps on interest rates, regulation of cross-border capital movements, and (generally) a tighter connection between government and banks.”

That, coupled with confusing and excessively verbose and conflicting media statements, serve to bamboozle the investor marketplace into a state of suspended animation, where bold moves are neutered and throttled capital velocity ensure becalmed markets.

The practice has taken on new and significant meaning for individual investors, since the advent of quantitative easing and “negatively yielding” government bonds, which are now seen as threats to overall financial stability. The proliferation of new capital means competition for assets in markets that are meant to drive prices higher, which massively distorts asset valuations overall.

In the modern context, evidence of collusion among the G7 countries in repressing financially their own captive domestic audiences is visible in the communications originated by government institutions and parroted by mainstream financial media outlets.

After collectively pumping US$150 billion into the world inventory of government-fabricated capital in the last quarter, it appears the mood has suddenly shifted, and a consensus arrived at seeking to assuage the concerns of investors in sovereign debt and associated derivatives who are increasingly worried about debasement and the spread of “negative yields.” (Their term for “investment fees.”)

A series of press releases and mainstream news articles last week was remarkable for the apparently coincidental shift in tone and accidental alignment on messaging.

The European Central Bank, for example, issued a communique stating that the Brexit “level of stress had been contained, with no evidence of disorderly price movements.” The bank further opined that “fiscal policy stance was expected to be neutral in 2017, after being slightly expansionary in 2016, and also highlighted the need for full and consistent implementation of the rules of the Stability and Growth Pact, both over time and across countries, in order to maintain confidence in the fiscal framework.”

Wading through the muddle of the United States Federal Reserve Bank’s minutes from the last Federal Open Market Committee meeting released on Wednesday, August 18, 2016, is not light summer reading. The text is rife with windy, repetitious, looping jargon that requires reading and re-reading to ascertain its intended meaning. One might go so far as to surmise that it’s designed not to be read.

A distillation of the intended meaning is thus akin to the interpretation of hieroglyphics or cave paintings from a lost civilization.

So it’s no surprise then that media sources stuck with the same limitations arrive at disparate conclusions as to what information is contained in the minutes.

The Wall Street Journal, for example, discerned the insinuation for a potential interest rate hike in the fall. “The Fed’s Wednesday release of minutes from its July 26-27 meeting suggested a rate increase is a possibility as early as September, but that the Fed won’t commit to moving until a stronger consensus can be reached about the outlook for growth, hiring and inflation.”

Bloomberg, meanwhile, concluded that January 2018 is the soonest that a rake hike is possible.

Confused? You’re supposed to be. How else to quietly liquidate the unprecedented massive government obligations into the public interest while pretending that all is well?

Disclaimer: The views or opinions expressed in this blog post may or may not be representative of the views or opinions of the Financial Repression Authority.

“Financial repression is a historically continuous process. Once governments are no longer able to finance their expenses with the means at their disposal, they always avail themselves of the financial repression toolbox. In view of the intractability of today’s situation, in which mountains of debt have long grown beyond the threshold of comprehensibility and structural deficits are obvious, savers have to be cautious. What can investors do? They should acknowledge that their wealth is under threat and obtain information on potential alternatives.”
– Ronald-Peter Stoeferle
LINK HERE to the article

Disclaimer: The views or opinions expressed in this blog post may or may not be representative of the views or opinions of the Financial Repression Authority.

Overlooked at Jackson Hole – Kansas City Federal Reserve paper: “With these advantages in mind, the paper describes three methods by which the zero bound on interest rate policy can be unencumbered completely. The three methods in turn would: i) abolish paper currency; ii) introduce a market determined flexible deposit price of paper currency; and iii) provide electronic currency (to pay or charge interest) at par with deposits, with or without the provision of paper currency as in (ii) above. Each method is assessed for its effectiveness, technological requirements, institutional modifications, potential for expedited implementation, and acceptability with the public at large.”
LINK HERE to the paper

Disclaimer: The views or opinions expressed in this blog post may or may not be representative of the views or opinions of the Financial Repression Authority.

Charles Hugh Smith*: “The only possible output of extreme wealth inequality is social and economic instability. What happens when extremes of wealth/power inequality have been reached? Depressions, revolutions, wars and the dissolution of empires. Extremes of wealth/power inequality generate political, social and economic instability which then destabilize the regime. Ironically, elites try to solve this dilemma by becoming more autocratic and repressing whatever factions they see as the source of instability. The irony is they themselves are the source of instability. The crowds of enraged citizens are merely manifestations of an unstable, brittle system that is cracking under the strains of extreme wealth/power inequality .. Unlimited policing and financial repression will unleash a destabilizing tsunami that will threaten the integrity of the Empire and the Deep State itself.”
link here to the essay

Disclaimer: The views or opinions expressed in this blog post may or may not be representative of the views or opinions of the Financial Repression Authority.

“‘You can pay me now . . .” counsels the sensible mechanic promoting Fram oil filters in the old-time advert, ‘ . . . Or pay me later,” interjects his pricier associate, as he tinkers with the broken engine of a customer who has ignored the advice. Central bankers should take heed. Dirty oil and artificially priced financial markets have much in common. Both can destroy engines eventually — and in the case of central banking it is the motor of the real economy that is at risk .. A negative effect of zero lower bound yields and interest rates can be observed. Investment — an important source of productivity growth — has never returned to the norms seen before the global crisis .. Corporations are using an increasing amount of cash flow to buy back shares as opposed to investing for growth. In the U.S., more than $500bn is spent annually to boost investors’ incomes rather than future profits. Money is diverted from the real economy to financial asset holders — where in many cases it lies fallow, earning little return if invested in government bonds and money markets .. Historic business models with long-term liabilities — such as insurance companies and pension funds — are increasingly at risk because they have assumed higher future returns and will be left holding the short straw if yields and rates fail to return to more normal levels. The profits of these businesses will be affected as will the real economy. Job cuts, higher insurance premiums, reduced pension benefits and increasing defaults: all have the potential to turn a once virtuous circle into a cycle of stagnation and decay. Central bankers are late to this logical conclusion. They, like most individuals, would prefer to pay later than now. But, by pursuing a policy of more QE and lower and lower yields, they may find that the global economic engine will sputter instead of speed up.”
– Bill Gross*
LINK HERE to the op-ed
LINK HERE to an alternative source

Disclaimer: The views or opinions expressed in this blog post may or may not be representative of the views or opinions of the Financial Repression Authority.

What is Financial Martial Law and how could it be imposed here in the UK?

SOURCE: MoneyWeek: Tim Price  01/08/2016

“Financial martial law” is a term I first began using privately in the summer of 2015. It was an evolution of another term – financial repression – that was in vogue at the time. Both refer to the steady and what I believe to be the deliberate erosion in your financial freedom of action – perhaps your personal freedom as well. But there was a key difference.

What is Financial Fepression?

Financial repression is an expression that applies mainly to interest rates. Specifically, it’s what happens when governments, through their central banks, keep interest rates artificially low. The policy is good for governments but it’s disastrous for savers and investors.

It’s easy to see why governments would use financial repression. A policy of ultra-low interest rates makes it cheaper for the government to borrow (issue new bonds) or refinance existing debts. The policy of financial repression exists because governments are some of the largest debtors in the world. Ultra-low interest rates via financial repression make large annual deficits and total debts more affordable and politically acceptable.

Financial Martial Law vs Financial Repression

How is financial martial law different from financial repression? As I began to research the topic last year, it became clear to me that financial martial law was potentially a much more powerful and destructive weapon than financial repression. Why? There are three reasons.

First, financial martial law introduces the element of negative interest rates to the discussion. It is one thing to earn very little interest on your savings; it is quite another to face the prospect of having to pay a bank in order to keep your money on deposit. Yet this is exactly what authorities began proposing last year.

Since then, over $11trn in government bonds have been sold at a negative yield. In Switzerland, government bonds of all durations (from short-term to very long-term) have a negative yield. In Germany and Japan, bonds up to ten years in maturity trade with a negative yield. The trend is alarming.

Financial Martial Law in the UK

Here in the UK, the global trend of negative bond yields has dragged ten-year gilt yields below 1%. For pension funds and savers, the vanishing yield on gilts not only makes earning any income harder, it limits your financial freedom of action. That’s why negative rates are a key component of financial martial law: just like a curfew or a roadblock, they restrict the choices you can make with your money if you’re looking for a safe way to earn income.

The second reason financial martial law is far more powerful than financial repression is that it makes it harder for you to get your money out of the bank in a crisis. The precedent here was set in Cyprus in 2013. Certain depositors in Cypriot banks were “bailed in” to help recapitalise the banking sector. In simple terms, they had their savings confiscated.

I hasten to add that under new European Union banking regulations, the “bail in” is now the law of the land. This new law came into effect on 1 January 2016 and is called the Bank Recovery and Resolution Directive (BRRD). It was intended to prevent future taxpayer-funded bailouts of banks like we saw in the last financial crisis.

But what you and other UK citizens may not know is that under the law, you are considered a “creditor” of the bank. While you may enjoy deposit insurance on your savings with the bank, the global financial regulators have taken clear steps to make you pay the next time the banks need more capital (to offset loan losses or bad investments).

While I personally am not a fan of “bail outs” – I believe the free market, not the monetary authorities, should choose winners and losers – BRRD and other regulations like it are part of financial martial law. Quite simply, if you can’t get your money out of the bank when you want – if your money can be taken from you without your permission – then it’s not your money any more. This is financial martial law.

The War on Cash

The third element of financial martial law goes far beyond anything imagined by mere financial repression. It’s the war on cash. I’ve written a whole book on the subject. But in simple terms, it’s the final assault on your financial freedom of action when all other methods fail.

This story unfolds a little more each day. But in principle, the war on cash is about forcing you to use a digital currency that can be taxed, tracked, controlled, and inflated away in order to get you to spend it faster. Only recently has technology made this level of micro-economic coercion possible. But I believe it will be one of the final stages of financial martial law, imposed in the next crisis as a way to prevent a run on banks.

Whether you’re an investor, a saver, a pensioner, or simply a free citizen who believes in the right to earn and spend your money as you see it, financial martial law is a direct threat to your freedom. It’s my goal, in the London Investment Alert, to help you preserve as much of your freedom as you can, through a sound analysis of the current situation and helpful advice on how to position yourself ahead of the introduction of financial martial law. It won’t be easy. But nothing worth doing ever is! Click here to find out more about the London Investment Alert.

Disclaimer: The views or opinions expressed in this blog post may or may not be representative of the views or opinions of the Financial Repression Authority.

It’s Called Financial Repression, and Governments Around the World Are Doing It
Countries are adopting policies to encourage or require savings to be lent cheaply to the government

The Bank of Japan took special measures last week to help its banks access greenbacks. Above, the central bank in Tokyo last month.

SOURCE: Wall Street Journal By JAMES MACKINTOSH Aug. 1, 2016

The money markets are screaming about a global shortage of dollars. Financial stress indicators are flashing yellow. The Bank of Japan on Friday took special measures to help its banks access greenbacks, and interbank borrowing rates for dollars are at the highest level since 2009.

In the 2008 and 2011-12 panics, the money markets acted as a warning of a credit crunch, as trust between lenders and borrowers broke down. This time, though, the signs of stress are a result of something else: The campaign by governments to direct financing to themselves, limiting access by the private sector.

In the U.S., there are legal changes under way in the money markets, which is prompting money to shift from “prime” funds, which buy short-term debt issued by companies, to instead buy short-term debt issued by the U.S. Treasury.

This is merely the latest example of what academics call financial repression, a broad category of government policies adopted to encourage or require savings to be lent cheaply to the government. Repressive policies were the norm in Western markets for decades following World War II. That was until the financial liberalization was begun by Margaret Thatcher in the U.K. and then-President Ronald Reagan in the U.S.

New rules since the Lehman Brothers failure have again tightened the screws on lending to the private sector, while favoring government financing in multiple, complex ways, most obviously through exempting banks from holding capital against government debt.
There are, of course, good reasons for most of the restrictions on the financial sector, including on money funds. Don’t forget that, after Lehman, the U.S. government bailed out the money markets with a guarantee against losses.

The aim of the overhauls is to prevent a repeat of the panic selling of prime funds, akin to a bank run. The most eye-catching rule will stop institutional funds from offering an unchangeable $1 net asset value for each dollar on deposit. This is designed to reduce the psychological impact of “breaking the buck,” or falling below $1, which can lead to widespread withdrawals.

All money funds also will be given an option to restrict or impose a fee on withdrawals when a fund’s easy-to-sell assets are depleted. This makes explicit that in times of stress it might be impossible to access one’s money. This has prompted assets in prime funds to drop below $1 trillion for the first time this century.

So far, so sensible. But there is a wrinkle. Money funds that buy government paper are exempt from the new rules, on the basis that Treasury bills are always easy to sell and there is no risk of default. The rule makers seem to have forgotten the near default in 2010 and the downgrade of the U.S. debt rating, not to mention the accidental failure to pay some Treasury bills in April 1979 due to paperwork backlogs.

The effect of the exemption is that money has poured in to government funds as investors worry that they might not always be able to access cash in prime corporate funds.

Carmen Reinhart, a finance professor at Harvard University’s John F. Kennedy School of Government, says governments across the developed world are interfering more with private flows of cash as their financing needs soar. Directing money to the state at the same time as the central bank keeps interest rates below inflation to boost growth amounts to a subsidy of the government by savers, a hidden tax.

“The way we have revamped regulation has clearly favored government debt,” she said. “The regulation creates the captive audience, and the monetary easing creates the ‘tax.’ ”

Outside Iceland, Greece and Cyprus, the West remains far less financially repressed than in the 1950s or 1960s, when capital controls meant Britons couldn’t take more than £50 ($66) out of the country, while Americans were still forbidden from investing in gold.

But subtle rules funnel more bank and insurance-company savings to government paper, by assuming it is always easy to buy and sell and will never default. Accounting shifts have encouraged corporate pension plans out of volatile stocks and into bonds, and several countries have grabbed assets from state pension funds.

There is hope. Financial repression is on the rise, but savers still can avoid it. Prime money-market funds might look less attractive under the new rules, but the economic reality of what they own remains unchanged, as do the risks. Just because a fund can now suspend withdrawals or impose a fee in a crisis doesn’t mean that under the old rules money would have magically been available.

Other options remain open, too. While rates may be low everywhere, cash still can be sent abroad and pays more in some countries. Finally, anyone worried enough about financial repression to want to avoid government paper entirely can switch into gold. So long as that remains an option, financial repression isn’t complete.

Disclaimer: The views or opinions expressed in this blog post may or may not be representative of the views or opinions of the Financial Repression Authority.

Cumberland Advisors’ David Kotok provides an insightful analysis on the nature of money, cash & the trend towards negative interest rates in bond around the world .. “The characteristics of cash include the value of its purchasing power. ‘Store of value’ is one of money’s prime attributes .. With little inflation in the price level and mostly stable prices, the ‘medium of exchange’ function becomes very reliable.” .. with negative interest rates, this “norm” changes .. “When the interest rate is zero or less than zero, which alternative is more desirable? In our view, it is cash. The risk rises in the negative-interest-rate security. The longer the maturity and the deeper the negative rate, the higher the risk associated with that instrument. That is the trade-off of negative interest rates versus cash.” .. Kotok sees bond risk rising – “Our conclusion is that bond risk is rising. At Cumberland Advisors we are repositioning portfolios gradually in both taxable and tax-free bond accounts. We do that by altering the composition of the bonds to have more defensive characteristics and by shortening duration.”
LINK HERE to the essay

Disclaimer: The views or opinions expressed in this blog post may or may not be representative of the views or opinions of the Financial Repression Authority.

CB’S “ALL IN” ATTEMPTING TO HALT THE LOOMING GLOBAL RECESSION

CENTRAL BANKERS FIGHTING AN UNPRECEDENTED GLOBAL SLOWDOWN

The mainstream news sources seem determined to ignore the extent of the global slowdown in trade. Whether exports, imports, industrial production or whatever your preferrred metric, the facts are undeniable. Nevertheless, the mainstream media chooses to refuse to cover it. It begs an obvious question of – why?

What needs to be understood about the global economic slowdown is that it stems from economic activity in the two engines of world activity which are now stalled. China and America (“Chimerica”) are slowing rapidly as a result of an inability to fundamentally sustain their current credit expansion rates. Desperate attempts by both countries have been unsuccessful in altering the downward trajectory which is steadily gaining momentum.

A POTENTIAL GLOBAL RECESSION – Act Now Or Persih

The Central Bankers of the world are acutely aware of this fact and know how devastating a global recession would be in the current highly indebted and over leveraged financial environment. Though Central Bankers programs have been unsuccessful they have fully understood since the year beginning market drawdown that they must act – and fast!

The US Economic Output Composite Index illustrates how the time had come in Q1 2016 relative to previous intervention programs.

CALL TO ACTION – Failed Central Bank Policy Dictated “More of the Same!”

The Central Bankers reacted and reacted forcefully beginning in Q1. They have taken “liquidity pumping” at $180B / month to levels more than double those during QE3 with more promised to soon come from the BOE, ECB and BOJ.

GLOBAL CENTRAL BANKERS – Clearly a Coordinated Global Response

The Bernanke “Enrich-thy-Neighbor” Doctrine is now in full bloom as the central banks in a coordinated sequential manner are implementing furthger policies to dramatically increase global liquidity.

ILLUSTRATION: BERNANKE’S ” ENRICH-THY-NEIGHBOR” DOCTRINE IN “FULL BLOOM”

A POTENTIAL MARKET COLLAPSE- Act Now Or Persih

As former Federal Reserve Governor Kevin Warsh said on CNBC, the Fed is not “Data Dependedent” but rather “Market Dependent”! Central Bankers are reacting to the market for fear of an errosion in collateral values underpinning massive excess financial leverage. They had to act or crumbling collateral values associated with a “Rehypothecation” implosion would quickly engulf the markets.The markets have been signalling major technical reversals are ahead since early 2016. The Central Bankers had little choice in their mind but to undertake the programs they did.

“HEAD & SHOULDERS”

OUR “M’ TOP

We have laid out our expectations of an “M” top since near the market bottom in early 2009. As shown below we have completed our “M” top and one of two courses will now be followed. The market will begin a protracted secular Bear Market OR the Central Banks will flood the world with liquidity thereby artificially lifting the markets.

The following chart illustrates that the Central Banks’ globally coordinated liquidity pumping policy to stop the markets from following is presently working.

This would suggest that our “M” top will now “morph into a ‘fractal'” of the Megaphone pattern we have seen since the Dotcomm Bubble burst in 2000. This will final leg will be the Minsky Melt-up we have also suspected still lies ahead.

IT WON’T WORK – 7 Years of Unintended Consequences are Coming Home to “Roost”!

The Central Banker actions will temporarily work but the Credit Cycle has turned which will quickly make their efforts futile.

Expect a resulting Currency Crisis to dominate the financial markets in 2017.

Disclaimer: The views or opinions expressed in this blog post may or may not be representative of the views or opinions of the Financial Repression Authority.

New Economic Thinking .. With the power of modern computing being harnessed into increasingly small & portable devices, what do digital platforms mean for the entrenched global economy? As technology catches up with our theories of information in the marketplace, much of the predominant ideology is being re-opened for examination. Perhaps we could now leave central planning to the machines as Oscar Lang envisioned, & if so, then what would that mean for models for the firm & production? Who reaps the fruits from all this, & how are they distributed? .. Nick Johnson (Head of Platform at Applico, author of the new book Modern Monopolies, & the world’s first Pokémon Go Master) provides us with an insightful overview of what the future might hold for this immense power we all carry in our pockets .. 15 minutes

Disclaimer: The views or opinions expressed in this blog post may or may not be representative of the views or opinions of the Financial Repression Authority.

“World markets are in the midst of something on a frighteningly grander scale than the financial crisis .. Tens of Trillions of sovereign debt have become trapped in speculative melt-up dynamics, as central bankers, derivative traders, speculators and safe haven buyers all battle to procure precious bonds. And I don’t believe it’s coincidence that the world’s largest derivative players are seeing their stock prices suffer under intense selling pressure. Meanwhile, sinking bank shares heighten market fears, which only feeds the dislocation and reinforces the dynamic imperiling the big derivative operators .. Brexit could easily have spurred a problematic ‘risk off.’ Instead, a globally super-charged sovereign debt dislocation/melt-up has completely overwhelmed the markets. The disappearing supply of sovereigns and resulting evaporation of yields – coupled with the prospect of endless QE – have led to a generalized risk market short-squeeze and unwind of hedges. This worked to solidify the notion that corporates and EM would now provide the primary source of yield for a freakishly yield-desperate world. And with visions of over-abundant liquidity and ultra-low corporate borrowing costs as far as the eye can see – replete with M&A boom and buybacks forever – it has become possible to overlook a lengthening list of fundamental factors overhanging equities markets.”
– Doug Noland
LINK HERE to the essay

Disclaimer: The views or opinions expressed in this blog post may or may not be representative of the views or opinions of the Financial Repression Authority.

Wall St for Main St interviews Jim Puplava .. discussion on why Puplava thinks gold & gold stocks have rebounded so much since December, & about negative interest rates – how it is very good, in his opinion, for gold & gold stocks .. Puplava thinks financial repression & NIRP are forcing people looking for income into stocks & that’s preventing stocks from crashing .. 38 minutes

Disclaimer: The views or opinions expressed in this blog post may or may not be representative of the views or opinions of the Financial Repression Authority.

“Our forecast, and the direction taken by our portfolios, is for accelerating inflation over the coming months. This phenomenon will take markets and officials by surprise, and I believe that it will change the world we know today. Financial repression will continue to be the order of the day, partly because central bankers will remain in intellectual denial and partly because of fears that rate normalization will bring economic activity tumbling down. The early part of this period of accelerating inflation should prove beneficial to many assets, among them commodities and well financed equities. Coming out of denial — beyond our investment horizon — will be painful and very damaging to debt burdened sovereigns and corporations.”
LINK HERE to get the Report in PDF

Disclaimer: The views or opinions expressed in this blog post may or may not be representative of the views or opinions of the Financial Repression Authority.

Gordon T Long & Charles Hugh Smith have written many an article & hosted many videos & podcasts highlighting the escalating bubble in student loan debt & the escalating cost of higher education. Artificially held down interest rates have contributed to many of the factors causing this bubble .. repressed low interest rates have enabled many students to borrow increasingly massive levels of money – in essence overvaluating the benefits of a college education ..

“Once upon a time in America,” says professor Sajay Samuel, “going to college did not mean graduating with debt.” Today, higher education has become a consumer product — costs have skyrocketed, saddling students with a combined debt of over $1 trillion, while universities & loan companies make massive profits. Samuel proposes a radical solution: link tuition costs to a degree’s expected earnings, so that students can make informed decisions about their future, restore their love of learning & contribute to the world in a meaningful way .. 12 minutes

Disclaimer: The views or opinions expressed in this blog post may or may not be representative of the views or opinions of the Financial Repression Authority.

OtterWood Capital’s Christine Hughes explains the absurd concept of negative interest rates & what they are doing to the global banking system .. 7 minutes

Disclaimer: The views or opinions expressed in this blog post may or may not be representative of the views or opinions of the Financial Repression Authority.

 

The former CEO of AIMCO presented at the IPCM 2016 conference in Montreal this month .. he emphasizes that long term economic prospects are better than the forecasts suggest” & that “pension plans can earn a better return by providing patient capital to commercialization of new technology” .. the message – pensions talk about investing for the long run but focus on the short term results & avoid making interesting investments (to avoid headline risk in the short run), they’re doing their members a great disservice & impeding much needed economic growth.
LINK HERE to get the PDF
LINK HERE to Leo Kolivakis’ summary of the conference

2016 06 13 Montreal LdB

Disclaimer: The views or opinions expressed in this blog post may or may not be representative of the views or opinions of the Financial Repression Authority.

Incrementum’s Ronald Stoeferle & Mark Valek, the managers of the Incrementum funds, have released the In Gold We Trust report, one of the most comprehensive & most widely read gold reports in the world .. this year includes a detailed discussion of gold’s properties in terms of Nicholas Nassim Taleb’s “fragility/ robustness/ anti-fragility” matrix, as well as close look at the last resort of mad-cap central planners that goes by the moniker “helicopter money”.

LINK HERE to get the PDF

Disclaimer: The views or opinions expressed in this blog post may or may not be representative of the views or opinions of the Financial Repression Authority.

How Future Generations Will See Today’s Financial Repression

If you were to look around you (during your trip to the future) and perhaps wander into a college class on economics, chances are you would soon encounter a lecturer talking about the “Great Economic Collapse” of the early 21st century. In other words, talking about where we are right now.

When those lecturers talk about the Great Economic Collapse (in our imaginary future), chances are that the single most critical aspect of their discussion will boil down to this: how is it possible, they will ask, that the people alive at that time did not notice what was taking place all around them?

How is it possible, they will ask their students, that the public of that era (our era) sat back in total stupefaction while…

* Multiple banks, financial agencies and even government regulators not only did nothing to prevent the “bad paper” collapse of 2007—the one immortalized in The Big Short movie—but, in many cases, actually participated in the fraud, and profited handsomely from such participation?

* Faced with overwhelming evidence of the culpability of key banks and conspirators, the democratically elected government of the day not only did nothing but, astonishingly, went one step further and declared most of the bad actors “too big to fail” and then handed them billions of dollars shortly—and appropriately—before Christmas, dollars which had been entrusted to them by the public?

* Shortly thereafter, the Federal Reserve (an agency no more “federal” than Federal Express)—working in conjunction with other so-called central planners around the globe—in full view of the wide-eyed public, intervened in the interest rate market and basically hijacked it, usurped it, and bent it to their will, which ushered in an era of ultra-low rates that not only failed to generate any obvious benefits for Main Street, but paradoxically, rewarded the corporations, banks, and already-rich to a degree that was literally beyond imagination.

Faced with overwhelming evidence that their policies were not working for the intended purpose—and, in fact, were creating new and dangerous market distortions—these same central planners not only stubbornly continued the madness and mayhem, but they also actually took it to a new level. (ZIRPs, or zero interest rate policies, morphed into NIRPs, or negative interest rate policies, in most parts of Europe.) Didn’t Einstein once say that the essence of stupidity is repeating the same action over and over and expecting a different result?

During this same period, the only entities jumping for joy under these regimes were the trading houses (borrowing at zero means making a profit on any investment yielding more than zero!) and the corporations, which discovered that by borrowing at low rates to buy back their own stock, they could reduce their “float” (make less stock available) and therefore drive up the price of the remaining stock, making themselves look clever (even though THEY WERE NOT) and earning massive executive bonuses in the process. (It is my often-stated view that historians of the future will look back at quantitative easing as a mechanism to benefit the banks and ultra-rich, and little else.)

Nor can it be said that the public of the era (our era) was not offered objective information with which to make sense of this. During these troubled times, any brave soul who would have googled the term “financial repression” would have learned that all these strange measures, taken as a whole, were simply part of what governments “do” when they get in deep trouble and need to bail themselves out at the expense of the very same electorate who foolishly gave them power in the first place!

EXTRACTED FROM:  The Coming Great Pension Collapse—How, Why, Where

Disclaimer: The views or opinions expressed in this blog post may or may not be representative of the views or opinions of the Financial Repression Authority.

LINK HERE to the article

Disclaimer: The views or opinions expressed in this blog post may or may not be representative of the views or opinions of the Financial Repression Authority.

“In the absence of pro-growth policies on the fiscal side, the sole support in the developed world has been monetary policy. There’s been a more or less universally practiced set of monetary policies consisting of zero and now negative interest rates and so-called quantitative easing — various forms of asset buying. It started out as all bond buying, but now it’s leaked into equities. The result of all that — I call it monetary extremism — is that the economies have held up and had some growth, but that growth has been tepid, with the biggest gains going to those who own financial assets while wage growth has been stagnant.
The cure for the crisis — for the debt crisis, the financial crisis — has been deemed by the developed world governments to be more debt. There has not been a deleveraging ..  I think it’s a very dangerous time in the financial markets.”
– Paul Singer

LINK HERE to the article

Disclaimer: The views or opinions expressed in this blog post may or may not be representative of the views or opinions of the Financial Repression Authority.