06/14/2016 - Avoiding Financial Repression: Commerzbank Considers Hoarding Billions In Cash To Avoid Negative Interest Rates
Commerzbank, one of Germany’s biggest lenders, is examining the possibility of hoarding billions of euros in vaults rather than paying a penalty charge for parking it with the European Central Bank, according to sources familiar with the matter .. “Such a move by a bank part-owned by the German government would represent one of the most substantial protests yet against the ECB’sultra-low rates, which have been criticised by politicians including Finance Minister Wolfgang Schaeuble.”
06/14/2016 - Financial Repression Is Causing More Risk Taking To Maintain Returns
Articles highlight the trend by investors to take more & more risk in an attempt to get the same investment performance returns as many years ago when bonds easily provided those returns .. hedge funds are looking towards Australia where many Australians manage their own pension savings in an attempt to offer investor returns .. “Hedge funds who introduce complex trading strategies to mom and pop investors and massive pension funds – what could possibly go wrong there?”
06/06/2016 - FRA Sees All Eyes on US-China Strategic Dialogue Summit in Beijing
The July FOMC meeting is being framed today in China.
The FRA was fully expecting an “obfuscated” Jobs Report on Friday to give Yellen the time and cover she needed in striking an agreement with China, now that the Shanghai Accord has clearly broken down.
The FRA presently expects a Fed hike in the July FOMC meeting but NOT BEFORE a final resolution on the DEVALUATION OF THE YUAN is agreed to between the US and China.
China has already fired four devaluation salvos across the US bow in the last 4 weeks. China is out of time and patience.
Remember: China is selling FX Reserves held in US Treasuries and are the banker to a continuing rising US debt requirement.
Both a cheaper Yuan and US$ are required – but what is to be debated at the US_China Summit is how?
06/05/2016 - BMG’s David Chapman On The Bail-In: Or How You Could Lose Money In The Bank
BMG’s David Chapman discusses the failing banking system & Canada’s stance in the unlikely event of a large bank failure .. “Those at risk of a bail-in in the event of a failure are subordinated debt holders, bondholders, preferred shareholders and any accounts in excess of $100,000 not covered by CDIC insurance. Their bonds, preferred shares, deposits etc. would be converted to capital to re-capitalize the banks. According to the financial statements of the CDIC, they insured some 30% of total deposit liabilities, or $684 billion, as of April 30, 2014. The remaining 70% not insured would primarily be large depositors, including both large and small businesses, and other banks and financial institutions. Depositors can avoid problems in a bail-in regime, but to do so they must be aware of the rules and have taken steps to ensure the safety of their funds. The bail-in regime would only apply to eligible Canadian banks and financial institutions. As was noted, it would not cover brokerage accounts, pension funds and mutual funds.”
06/05/2016 - BitGold On Negative Interest Rate Policy & Financial Repression
Wall St For Main St interviews the Co-Founder & the Chief Strategy Officer of Bitgold, Josh Crumb .. discussion on why gold has rallied in U.S.$ terms since December .. a discussion about negative real interest rates & how the gold bull market has actually been going on for more than 2 years in other currencies besides the U.S.$ .. a discussion on negative interest rate policy & the attempt by many global central banks to implement financial repression .. gold will be an even more attractive alternative for investment & savings the more attempts central banks try at manipulating interest rates down as part of negative interest rate policy or NIRP .. 34 minutes
05/31/2016 - Michael Belkin: Central Banks Are Lighting A Rocket Under The Gold Price
“Gold, silver and gold/silver mining stocks have commenced a new long-term bull market. It’s like buying the Nasdaq in April 2009. Meanwhile, global stock indexes have been in a broad topping process for years, our global composite stock index stands at the same level as it did in December 2013, two and one half years ago. The trend has not been your friend in stock indexes, every rally has fizzled out for buy-and-hold stock market investors .. Gold is a currency, it is held as a reserve asset by central banks along with their FX holdings. QE, ZIRP and negative interest rates (NIRP) have destroyed central bank credibility and the value of major reserve currencies (dollar, euro, yen, yuan) .. The failed policies of central bank credit expansion are lighting a rocket under the gold price, the asset that central banks can’t devalue. Precious metals mining stocks are leveraged to a rise in the gold price, profit margins and mineable reserves surge when precious metals prices rally. These are the conditions for a long-term bull market, in which dip-buying is rewarded with constantly higher prices. We continue to recommend the accumulation of gold and silver mining stocks on brief pullbacks. Gold is the central bank put.”
link here to the article
05/25/2016 - Paul Brodsky: Governments Are Devaluing To Ease The Burden Of Government Debt
“We have argued the inevitability of Fed-administered hyperinflation, prompted by a global slowdown and its negative impact on the ability to service and repay systemic debt. One of the most politically expedient avenues policy makers could take would be to inflate the debt away in real terms through coordinated currency devaluations against gold, the only monetize-able asset on most central bank balance sheets. To do so they would create new base money with which to purchase gold at pre-arranged fixed exchange prices, which would raise the general price levels in their currencies and across the world to levels that diminish the relative burden of debt repayment (while not sacrificing debt covenants) .. The fact that gold remains on the balance sheets of central banks and is being aggressively bought by them suggests it is gaining, not losing, relevancy as a monetary asset. The fact that it can be used as the fulcrum against which to devalue currencies gives it purpose. The fact that allocations to gold and gold-related assets remains less than 3% of investment portfolios makes it a superior risk-adjusted portfolio allocation .. Our view is that there will not be a switch to a fully-reserved banking system or even a reversion to a fixed exchange rate; however, there will be a significant increase in global currency devaluations against gold, and that it will be coordinated by monetary authorities.”
LINK HERE to the article
05/23/2016 - Assuming Big Returns On Pension Funds: A Lot Can Go Wrong
Article highlights the challenges & pitfalls of pension funds who are assuming year-over-year returns of say 4% or even 8% in a world of negative interest rates & low investment yields .. worse is the use of pension funds by governments to borrow money, invest it with the pension funds & get “yield” from the pension funds as it were free money .. “Take the Ontario government’s $5-billion deficit. The province can issue long bonds paying interest at 2 per cent in real terms. If the ORPP can reliably earn 4-per-cent real, let’s lever the two-percentage point difference: Borrow $250-billion, invest it with the ORPP and the profit will balance the budget. Better yet, borrow $500-billion, invest with the ORPP, and – presto – a $5-billion surplus! The federal government can do even better. The real yield on their long bonds is zero. If the Canada Pension Plan Investment Board (CPPIB) can reliably earn 4-per-cent real, Ottawa can borrow, say, $500-billion, invest with the CPPIB, and boost their bottom line by $20-billion. Free money! What could go wrong? Well, nothing – if 4-per-cent real, year-in year-out, is really a slam-dunk. But in reality, plenty. In fact, many U.S. state and local plans, including the Detroit plan that went bust in 2013, tried this trick – so beguiled by assumed high returns that they forgot their duty to make actual payments. It is one thing for individuals to shoot for the moon – gamble their own money and retirement. It is something else to do it on others’ behalf – especially millions of others, with failure meaning not just individual but societal hurt.”
05/23/2016 - Jim Rickards: How Central Banks May Raise Inflation To Address The Burden Of Government Debt
Jim Rickards highlights that government authorities are beginning to talk about bidding up the prices of gold to bolster inflation rates in an attempt t inflate away government debt .. “The global monetary elites had a conference in Zurich, Switzerland, last week. Among the speakers were William Dudley, president of the Federal Reserve Bank of New York, and Claudio Borio, chief economist of the Bank for International Settlements. The topic of the conference was the prospect of multiple reserve currencies in the international monetary system. The speakers generally agreed that a system with more reserve currencies (such as the Australian dollar, Canadian dollar and possibly certain emerging markets’ currencies in addition to the Chinese yuan) would be a desirable one. There’s only one problem… It’s a zero-sum game. All of the reserve currencies in the world add up to 100% of the reserve currencies. If new currencies have a larger share, then the U.S. dollar must have a smaller share. It’s just basic math. That means a long-term process of selling dollars and buying the new reserve currencies. That selling lowers the value of the dollar and imports inflation into the U.S. .. It also means a higher dollar price for gold. The elites won’t tell you that, but it’s true .. The key takeaway is that a higher dollar price for gold is just a lower value for the dollar. And that’s what the elite’s want. It’s part of their global inflation plan.”
05/22/2016 - Financial Repression How Savers & Investors Are Being Penalized
Wall St for Main St interviews Erik Townsend on Wall Street & the hedge fund industry .. Townsend thinks all the major central banks like the U.S., Japan, ECB, etc are trapped but predicting the timing of any collapse or market crash is almost impossible. He cautions people to avoid making big bets on the stock market crashing in the short term .. Townsend gives an excellent explanation of financial repression & how savers and investors, who have tried to do the right thing financially in their lives, are being penalized. Jason and Erik discuss how negative interest rates & a cashless society are following financial repression .. 54 minutes
05/20/2016 - Charles Hugh Smith: The Unintended Consequences Of Financial Repression
Charles Hugh Smith* explores the concept of property taxes on real estate .. do you really own your house if you have to pay $260,000 in property taxes over 20 years? .. “Owning a home no longer makes financial sense because the property taxes consume any appreciation other than the transitory ‘wealth’ generated by a housing bubble” .. Property tax is not based on consumption or income, but on “the presumed wealth & income of property owners. In effect, property taxes are a wealth tax: if you can afford a house, you can afford property taxes.” .. the problem with this is household income does not rise with housing valuation .. the unintended consequences of financial repression: “As pensions dry up and blow away under the relentless erosion of the Federal Reserve’s zero-interest rate policy (ZIRP), unaffordable property taxes may well start evicting homeowners from the ‘asset’ they mistakenly thought they ‘owned.’ If your Social Security pension can barely pay your property tax, never mind your Medicare, healthcare costs, food and other living expenses, then what exactly do you own?”
05/16/2016 - John Rubino: QE & Negative Interest Rates Have Adverse Unintended Consequences
“QE and negative interest rates turned out to have unintended consequences, one of which is a drying up of bond trading. If governments buy up all the high-grade bonds then obviously there aren’t many left to trade. And if the yield on new bonds is negative, holders of existing positive-coupon bonds have no incentive to sell them. Hence, eerily silent trading desks around the world .. The financialization of the global economy has created a vast sea of hot money that flows mindlessly from one location and asset class to another on a scale that exceeds traders’ ability to predict and/or manipulate. Put another way, in a world where it’s impossible to know what’s going to boom or crash next, it’s irrationally dangerous to place big bets on anything .. Where do we go from here? Probably into a crisis in which the world stops trusting markets, and financial assets are devalued accordingly.”
LINK HERE to the article
05/16/2016 - Yra Harris: Authorities Reveal Their Intentions To Financially Repress The Germans
“ECB President Draghi and IMF Director Lagarde HOPE to punish and repress the German saving class in an effort to salvage the EU via the alleviation of debt owed by the so-called peripheral nations .. German intransigence on the issue of budget profligacy means that the ECB will extract German wealth through financial repression, which means the that the frugal burghers will be taxed through negative interest rates to bail out the debt-burdened peripherals. Germany will be forced to share its current account and budget surpluses with the entire EU by direct transfer payments or financial repression .. The IMF is attempting to push Germany to undertake massive fiscal stimulus through welfare payments for the settling of refugees as wells public investment on significant infrastructure projects. The IMF has coupled with Larry Summers in promoting fiscal stimulus as an alternative to the questionable effectiveness of NIRP. At this juncture, a massive program of infrastructure investment would lead to an increase in German inflation because the German economy is just about at full employment. The end of German negative output gaps with the commencement of fiscal stimulus would mean pressure on German prices to rise .. At this juncture it appears that the IMF and ECB are both searching for ways to debase the wealth of German citizens either through NIRP or an inflation-creating infrastructure program instituted when the German economy has little excess capacity. The more debt the ECB purchases the greater the responsibility of German authorities to bear the burden of a tragically flawed EURO. Creating the unified currency without a harmonized budgetary process has led to a massive bundling of potential problems .. The elites are terrified of vox populi. For the European bond markets and its sovereign debt. The question will become more germane: WHO GUARANTEES THE ECB?”
– Yra Harris
05/13/2016 - Wolf Richter – TRANSPORTATION RECESSION SIGNALS RETAIL PROBLEMS AHEAD!
Financial Repression and the Structural Concerns for the Retail Market
FRA co-founder Gordon T. Long is joined by Wolf Richter to discuss the struggling retail market and its subsequent impact on the U.S economy as a whole which are a result of the recent financial crisis.
Wolf Richter is the founder of Wolf Street Corp. In his cynical, tongue-in-cheek manner, he muses on wolfstreet.com about economic, business, and financial issues, Wall Street shenanigans, complex entanglements, and other things, debacles, and opportunities that catch his eye in the US, Europe, Japan, and occasionally China. You can subscribe to his free emails and keep in touch with Wolf Richter’s research and news through his cynical, tongue-in-cheek manner, he muses on wolfstreet.com about economic, business, and financial issues.
He has over twenty years of C-level operations experience, including turnarounds and a VC-funded startup. He earned his BA and MBA in Texas and his MA in Oklahoma, worked in both states for years, including a decade as General Manager and COO of a large Ford dealership and its subsidiaries. But one day, he quit and went to France for seven weeks to open himself up to new possibilities, which degenerated into a life-altering three-year journey across 100 countries on all continents, much of it overland. He has written two books: BIG LIKE: CASCADE INTO AN ODYSSEY and TESTOSTERONE PIT.
Concerns of Financial Repression
Under financial repression the money that you earn does not compensate for the forward inflation on your investment. This is slowly eating up the savings of investors and bond holders in a period of low inflation, and is done so by the central bank to help aid governments and debtors in paying off the massive pileups of debt. We can expect this trend of financial repression is to go on for the time being due to the position most corporate firms and the government is in right now, as most economists believe a slight increase in interest rates would be catastrophic for the economy.
Retail Space
We are in a booming online retail environment which is not going to slow down any time soon. The problem with retail space is a structural problem due to the surge in online shopping. Everywhere we look in urban environments there are strip malls on every corner of the neighborhood and multiple outlets for the same retail store exist all across the states. With the drop in consumption in goods and services, a recession in the goods produced within the U.S. On a weekly basis we are seeing more and more stores shed employees and closing stores all across the country in order to cut operation costs and stay afloat.
“This creation of demand is just smoke and mirrors”
At the same time consumers are growing older, and had planned to live off their savings However, over the past years due to the shocks to the FIRE economy we have seen virtually zero growth in their savings. Causing shifts in their purchasing patterns towards cheaper and more affordable goods, trying to save on all levels and spend as less as possible. This all stems from financial repression, there have been no increases in demand but we still see an immense amount of retail space, creating a false sense of demand to consumers, showing promise of a improving economy at a time where it is nearly impossible to thrive.
Transportation Recession
“When you have a transportation recession like this, it tells you something about the goods produced in the economy in the United States, and it’s not over.”
There has been a large increase in stalled transportation vehicles including trucks and trains which simply have gone out of business due to a lack of demand in the market. This shows us the effects of the 2008 financial crisis still linger on heavily even today. The lack of demand and surplus of supply in many sectors of the economy including retail is continuously putting the U.S economy in a downward spiral and has kept it on the brinks of another recession.
“If service economy gives, if it starts to break apart even in a minor way I think we’ll have a recession.”
Luckily the service economy is still holding on and showing signs of improvement and growth. However, if the service economy gives out even in a minor way, the impact on the rest of us considering the tight situation at the moment will certainly throw the U.S into another recession within the coming fiscal year. Factoring the decline in goods produced is a great concern for the U.S since the goods consumed market is already collapsing.
This causes an alarm for even more concern in the economy, since the financial crisis even under financial repression we are still seeing a steady rise in debt. This debt carried over from the financial crisis affects every major company in the world. When these companies can no longer hold their own Wolf Richter believes that we will have a real risk for credit default.
The Changing of the credit cycle
“What concerns me the most; the amount of corporate debt, the amount of government debt and state municipal debt that’s out there since the financial crisis”
Credit rating companies have begun downgrading almost everything, meaning companies are no longer able to lend, and losing faith in many companies which can no longer continue doing business. The rise in bankruptcy alone should be a definitive sign of the turning credit cycle. This is not limited to any single industry, oil, energy, and retail especially companies are going bankrupt as their debts and expenses simply cannot keep up with the demand that is required to keep them running.
“In total there were about 3500 commercial bankruptcies, and that’s up 33% from a year ago”
Right now it is the number of small companies that are making headlines in failure to overturn their debt into sustainability. So even though there has been an increase in bankruptcies filed this year there is still a large sum of debt which is held in majority by the big fish of the sea. This provides us with further affirmation of the psychological behaviors of consumers in the economy hinting it to a difficult time for not only continuing to run business as usual but also for entrepreneurs. As the demand is simply not as it used to be in the past, and should expect a slow and painful recovery out of this worldwide debt.
Abstract Written by: Saad Gohir sgohir@ryerson.ca
Video Editor; Sarah Tung sarah.tung@ryerson.ca
05/13/2016 - FINANCIAL SURVIVAL NETWORK: Gordon T. Long – “Never Mis-underestimate the Follies of Central Banks!
from Financial Survival Network
Gordon T. Long says that the world’s central banks are on a mission to drive the US Dollar down lower. The world’s economy is in precarious condition and it cannot afford an escalating dollar. They’ve been brow beating the dollar to keep it down and are hoping that it will stay there. Yellen is trapped and there’s nary a rate increase on the horizon. It’s a global problem, global trade is in collapse. What’s a poor central banker to do?
05/13/2016 - FINANCIAL SENSE NEWSHOUR: Gordon Long on Secret ‘Shanghai Accord’
Speculation abounds of a closed-door meeting between leaders of the world’s largest economies to take down the US dollar. The reason: to provide relief to commodities, oil, and emerging markets. Gordon Long, co-founder of Financial Repression Authority, discusses the so-called Shanghai Accord and, if such a deal was struck, why it won’t have the same success compared to other accords formed in the past for the same purpose.
05/10/2016 - Financial Repression Pillar: Forced Inflation To Reduce The Burden Of Government Debt
“If interest rates go up, we can buyback debt at a discount if we are liquid enough as a country. People say I want to default on debt – these people are crazy. First of all you never have to default because you print the money I hate to tell you, so there is never a default. It was reported in the NYT that I want to default on debt – you know I am the king of debt, I love debt, but debt is tricky and its dangerous. But let me just tell you: if interest rates go up and bonds go down, you can buy debt – that’s what I’m talking about. So here is the story, if we have an opportunity where interest rates go up and you can buy back debt at a discount. I always like to be able to do that if you can do that. That’s all I was talking about, they have it like I’m going to go back to creditors and I am going to renegotiate or restructure debt. It’s ridiculous.”
05/09/2016 - Jim Bianco: Gold Is A “High Yield” Asset In A Negative Rate World
“The amount of debt yielding negative is now $8.1 trillion…65% of which is in Japan and pretty much the rest of it is in Europe right now. 20% of world sovereign bond markets are now at negative interest rates. If you exclude the U.S., it’s about 50%… My friend Jim Grant likes to say that the problem with the barbarous relic is for 5,000 years…it’s always yielded zero; it had no yield, and that’s always been the argument against owning it: ‘Why would you want to put your money in something that doesn’t yield you anything?’ Well, guess what? Today, a zero yield as gold has is a high-yield alternative when compared to $8 trillion dollars’ worth of investment options in sovereign bonds. So we are really in an alternative universe where the high yield is now zero.”
05/05/2016 - Larry Lindsey: The End Game Consequences Of Financial Repression
“Our training and bias have always been toward policy activism — that tweaking this or changing the dial on that can always make things better. But critics of activism, often lumped into the ‘Austrian School,’ argue that this will inevitably end badly .. Tweaking and dialing are addictive, both to the policymaker and to the governing class. Inevitably, this will lead to an unsustainable amount of tweaking and dialing and an endgame in which policymakers become powerless as the state’s monetary and fiscal dials are no longer functional and the state is, in effect, bankrupt. But as states never go bankrupt, they then must seize the assets under their dominion through either inflation, taxation and confiscation .. The Roman Empire tried all three. The medieval popes had their Jubilee Years in which all debts, particularly their own and those of other sovereigns, were forgiven. Debasement, grinding taxation, and confiscation from disfavored groups (often the Jews) were all part of the process .. The growth of societies trying these schemes diminishes. Long-term capital moves from growth-enhancing productive investment, which dries up as it increasingly gets channeled into the hands of the state.” – Larry Lindsey
05/05/2016 - Financial Repression: Ring-Fencing Regulations – Transatlantic Trade Investment Partnership (TTIP)
“These so-called ‘free trade agreements’ are not trade agreements. The purpose of the ‘partnerships,’ which were drafted by global corporations, is to make corporations immune to the laws of sovereign countries in which they do business. Any country’s sovereign law whether social, environmental, food safety, labor protections—any law or regulation—that impacts a corporation’s profits is labeled a ‘restraint on trade.’ The ‘partnerships’ permit corporations to file a suit that overturns the law or regulation and also awards the corporation damages paid by the government of the country that tried to protect its environment or the safety of its food and workers. The lawsuit is not heard in the courts of the country or in any court. It is heard in a corporate tribunal in which corporations serve as judge, jury, and prosecutor .. In other words, the ‘partnerships’ give global corporations the power to overturn democratic outcomes All of the blather about free trade and tariff reduction is mere cover for the only purpose of TTIP, which is to establish American economic imperialism over the peoples whose governments sold them out for money.” – Dr. Paul Craig Roberts, Former Assistant Secretary to the U.S. Treasury
The Financial Repression Authority (FRA) educates investors, funds and retirees on the adverse risks resulting from good-intentioned macroprudential central bank policies, government fiscal policies and financial regulations focused on controlling excessive government debt, attempting to stimulate economic growth, and minimizing the potential for financial and economic crises. FRA provides consulting services, lead generation services and retirement solutions.
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