Blog

10/12/2014 - Financial Repression Driving De-Dollarization Trend

Article identifies how South Koreans are dramatically increasing their bank deposits in Chinese currency – 55 times higher than the same period last year .. given inflation in Korea, a zero-interest rate financial repression-environment & frothy stock markets, South Koreans are diversifying their currency exposure .. “This is a well known scenario. Just as Europeans from countries with weaker currencies and economic prospects used to safeguard their savings by holding them in Deutschmarks and Swiss franks, we see the same trend happening today .. Individuals, companies and even governments are diversifying their currency exposure — mostly on the account of the U.S. dollar. Renminbi denominated bonds are now being issued by businesses all over the world– heck, even McDonald’s issued a renminbi bond .. And now the UK will become the first country in the world other than China to issue renminbi denominated government debt.”

LINK HERE to the article


10/09/2014 - ORIGINS OF US FINANCIAL REPRESSION

ORIGINS OF US FINANCIAL REPRESSION

BEGAN WITH GOLD MANIPULATION (Central Bank Leasing of Gold) IN MID 1980’S

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A Regression Channel that is simply too ‘pristine’ to be real!!

Control the US Treasury “RISK FREE” baseline (and Gold Prices)

….. and you control Global Credit / Debt Growth

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10/08/2014 - Unconstrained Fixed Income Becoming Popular In The Age of Financial Repression

Unconstrained bond strategies are becoming more popular, especially now that Bill Gross* is joining Janus to start a fund in this area .. one money manager: “In an era of financial repression and manipulated government bond rates, particularly in the developed markets, traditional market benchmarks currently offer low yields and long duration .. Unconstrained investing allows investors to seek the desirable characteristics of fixed-income — income, diversification and risk management — and avoid the undesirable — longer duration and high correlation to government rates .. Unconstrained strategies are not all the same and many of them are not even comparable .. Investors need to fully understand the risk and return objectives for a particular strategy and must evaluate each strategy based on its unique approach and characteristics.”

LINK HERE to the article


10/07/2014 - What is Financial Repression?

What does financial repression mean? .. short video explainer by Project M.

“This manipulation of the yield on government debt is the answer for the government, and socially, it is so much more acceptable than the alternatives. Whatever you think of the history of hyperinflation, austerity, default and deflation, they are socially incredibly disruptive, incredibly socially dangerous, and many of those market-driven events have led to warfare or massive domestic social unrest. I think in the grand scheme of things when the government sits down and decides which avenue to pursue, this avenue of repression .. will always be more socially acceptable than the market-driven events of austerity, hyperinflation, deflation, devaluation.”

– Russell Napier, CLSA


10/06/2014 - Financial Repression on Low Interest Rates For Very Long Time

The 16th annual Geneva Report by the International Centre for Monetary and Banking Studies & written by senior economists including 3 former senior central bankers, predicts interest rates across the world will have to stay low for a “very, very long” time to enable households, companies, & governments to service their debts and avoid another crash .. The report’s authors expect interest rates to stay lower than market expectations because the rise in debt means that borrowers would be unable to withstand faster rate rises .. 
“Global debt-to-GDP is still growing, breaking new highs .. At the same time, in a poisonous combination, world growth and inflation are also lower than previously expected, also – though not only – as a legacy of the past crisis. Deleveraging and slower nominal growth are in many cases interacting in a vicious loop, with the latter making the deleveraging process harder and the former exacerbating the economic slowdown. Moreover, the global capacity to take on debt has been reduced through the combination of slower expansion in real output and lower inflation.”

LINK HERE to the article


10/05/2014 - Financial Repression Is The Likely Approach For Governments To Pay Down Debt

Great insightful article on financial repression by Daniel Amerman .. questions how the U.S. federal government can pay down its enormous debt .. sees 4 primary options that the government can take:

1) Decades of austerity with higher taxes and lower government spending.
2) Defaulting on government debts.
3) Inflating away the value of the debt through rapidly slashing the value of the currency.
4) Using “Financial Repression”, a process that is complex enough that the average voter never understands how it works, thus allowing governments to use this potent but subtle method of taking vast sums of private wealth, year after year, decade after decade, with almost no political consequences.

The essay reminds readers the 4th option is the likely approach, points out the world took this approach in the 1940s through the 1970s to pay down government debt .. “Because of the sheer size of the problem – most of the population must be made to participate, year after year. Financial Repression therefore uses an assortment of carrots and sticks to ensure that investors have little choice but to participate – on a playing field that has been rigged against them as a matter of design – even if they are among the small minority who are aware of what is being done to them.”The essay covers 4 areas of financial repression:

1) Inflation (Shearing #1)
2) Negative Real Interest Rates (Shearing #2)
3) Funding By Financial Institutions (Fence #1).
4) Capital Controls (Fence #2). 

LINK HERE to the 2-part essay


10/04/2014 - Financial Repression of Interest Rates Will Wreck The Economy

Bill Bonner explains why financial repression of interest rates will, without question, wreck the economy ..  “Anything is possible in a NIRP (negative-interest-rate policy) world .. When central banks are resorting to negative interest rates, as the ECB did recently, everything goes topsy-turvy. A trillion dollars here… a trillion there. Pretty soon we’re talking about the end of the world as we have known it .. In Neverland, things are never what they seem. And we never know what they should be. Real prices are not set. They are discovered. Every minute. Every day. We know that today’s interest rates are not exactly on the level. But we don’t know how far off they are. Because the process of discovery has been perverted .. The interest rate you will pay depends on who you are. If you are a well-connected financial insider—say, a member of the Federal Reserve’s banking cartel—you can borrow from the Fed at 0.25% a year .. As Irish-French economist Richard Cantillon observed in the 18th century, when they are handing out free money, it pays to be in the front of the line. That’s because as more dollars are created, each one translates to a smaller slice of all goods and services produced. So expansionary monetary policies constitute a transfer of purchasing power away from those who hold old money to those who get new money.”

LINK HERE to the article


10/04/2014 - FED POLICY ADOPTION Macro Prudential Policy (Financial Repression) to be Yellen’s PRIMARY TOOL

LINK HERE to Article

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10/03/2014 - The Rich get Richer through FINANCIAL REPRESSION Right in front of our adoring, preoccupied eyes!

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Owner trades Pro Bowler Logan Mankins (2nd highest player on team)

Fans in shock & disbelief – Team paralysed – Sports writers say it makes absolutely no sense?

~Now 15M under Salary Gap

“The Patriots only pay to stay a contender – nothing more – damn the fans!”

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10/03/2014 - Origins of The Term “Financial Repression”

2014-10-02_10-34-02Financial repression is a term introduced in 1973 by Stanfordeconomists Edward S. Shaw & Ronald I. McKinnon & refers to the collction of economic policies, regulations & capital controls imposed by governments & central banks to facilitate public-sector deleveraging ..Allianz: “Today, with countries across the developed world entangled in debt, financial repression offers a roadmap to fiscal stability and a strong incentive for market intervention. But there are costs. Government intervention can produce market distortions—including today’s artificially low interest rates. In an environment of even moderate inflation, these low rates can result in negative real investment returns. That is why we believe it is critical for investors to understand how financial repression works, why governments choose to use it and what tools are best-suited to protect assets and purchasing power.”

LINK HERE to the article


10/02/2014 - Investing in Financial Repression & Unorthodox Policies

Article highlights the challenges of investing in today’s abnormal environment characterized by financial repression & unorthodox policies of record low interest rates & money printing.

LINK HERE to the article


10/01/2014 - REGULATORY CAPTURE & COLLUSION 47.5 Hours of Taped Proof the Financial Regulators are No Longer Regulating

The Wolves now guard the hen house – The full ProPublica story can be found here.

Sad Tale of the New York Fed and Goldman Sachs Has a Simple Solution09-27-14 TheDailyBellCorporate largeness inevitably generates government partnerships. This means that modern Western societies are mercantilist – run by a handful of individuals who circulate between the top posts of government and the leadership of private-sector multinationals. Within this context it is not surprising to find that the New York Fed is an ineffective regulator of the financial powerhouse Goldman Sachs. The process is called “regulatory capture”.

  1. Monopoly central banking concentrates decisions on the value and volume of money in the hands of a few.
  2. Corporate personhood allows individuals running large companies to avoid responsibility for their actions.
  3. I suppose I should add a third element into the mix … patent law and copyright

The Secret Goldman Sachs Tapes 09-26-14 Michael Lewis Bloomberg

And for those who are time-constrained, and would rather just read the Cliff Notes (the ending should be known to everyone by now), here is Michael Lewis with an op-ed in Bloomberg summarizing the banker-controlled farce the entire US system has devolved to: “The Secret Goldman Sachs Tapes”

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09/30/2014 - Inflation and Financial Repression Are Eating Away Assets And Wealth

FT Adviser essay considers the factors influencing the financial markets & wealth preservation .. low interest rates have driven investors away from bonds to speculate in stocks in which both the risks & potential rewards are higher .. emphasizes the negative effects of inflation & low interest rates on investments .. “Bonds are nominal assets rather than real assets, so they do not grow their income in order to counter inflation. This fact, along with the prospect of interest rates rising to counter higher expected inflation, will be on investors’ minds. Once investors have moved to high-yield bonds, the step up the risk curve to equities is no longer a million miles away – the advantage being that equities are real assets, and so may be expected to grow in line with, or even ahead of, inflation.” .. highlights the effects of financial repression on keeping interest rates close to 0 to stimulate the economy .. 

LINK HERE to the article


09/29/2014 - China’s Financial Repression and Alibaba’s Finance Plans

Forbes posted essay on the emerging clash between the plans of Alibaba to develop their financial offerings in China & the Chinese state policy of financial repression .. Alibaba’s plans are to expand their offerings in the financial sector include offering loans at 5.5% .. China has a deliberate policy of financial repression forces savers to buy property, buy life insurance or deposit money into a bank account . the savings deposit rates are very low, typically 1% .. inflation is higher than that, so depositors are losing money by depositing .. “Financial repression is not bullying people into giving you their money, it’s restricting options so that interest rates stay low. And as I say this is a deliberate public policy in China, to ensure that interest rates do stay low by limiting those savings options .. All of which makes this a most interesting little scenario. The current financial repression means that if Alibaba is able to continue with its plans then it will have a very successful product on its hands. But of course, there are those who benefit from the current repression and will they allow them to continue? In the long run the end of those limitations upon how the Chinese may save will benefit everyone. And they’ll almost certainly happen as well, in that long run. The question is going to be well, what happens in the short term?”

LINK HERE to the article


09/28/2014 - Canada Warns Its Citizens To Not Take Sizable Cash To The USA Capital Controls/Financial Repression Tightens

“The Canadian government has had to warn its citizens not to carry cash to the USA because the USA does not presume innocence but guilt when it comes to money. Over $2.5 billion has been confiscated from Canadians traveling to the USA, funding the police who grab it .. If you are bringing cash to the land of the free .. they are FREE to seize all your money under the pretense you are engaged in drugs with no evidence or other charges .. It costs more money in legal fees to try to get it back so it is a boom business .. only one in six people ever try to get their money back .. Money confiscated is usually allowed to be kept by the department who confiscated it .. This is strangely working its way into funding police and pensions .. This is identical to the very issue that resulted in the final collapse of Rome when the armies began to sack cities to pay for their pensions.”

– Martin Armstrong

LINK HERE to the article


09/28/2014 - Gordon T Long: Financial Repression Killing Middle Class & Capitalism Itself

WallStrForMainStr Interviews Gordon T Long:

“We have over 250 interviews with top guests in discussion. The Gordon T Long discussion is over an hour long and one of the best ones we’ve done all year.”

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09/26/2014 - Financial Repression Leads To Crony Capitalism

American Thinker posted essay on the fusion of government & major corporations we have come to call “crony capitalism” .. the essay takes the position that crony capitalism evolves as the private sector’s creative powers gradually decay amidst a government intent on the confiscation & redistribution of wealth .. “As the political state is incapable of creating wealth, as wealth can only arise in the private sector, the very act of confiscation and redistribution of that private sector wealth severely inhibits the investment that sustains the private sector’s creation of it. The result is that the private sector’s creative powers gradually decay. The source of new wealth cut off, wealth depletes. This degradation can only be delayed, not abated, by some sort of crony capitalism in which the state attempts to force private investment either by mandates and penalties or giving special subsidies; by picking winners .. I’ve come to the conclusion that no matter how far left the political philosophy that guides political decisions, the net depletion of economic wealth to be distributed will always lead to some sort of crony capitalism. As wealth depletion continues from weak private investment, confiscatory taxation, restrictive labor laws and the like, the welfare state relies ever more heavily upon coercion, both social and legal, and upon economic subsidies to favored firms to sustain itself .. France exemplifies this system.”

LINK HERE to the article


09/26/2014 - Pension Funds Will Be Taken To Fund Infrastructure – Financial Repression on Pension Funds

“The G20 Central Bankers and Finance Ministers met in CAIRNS, Australia, Sept 21st, 2014. This Summit reflects the attitudes about manipulating the economy where they just do not get it .. I warned what Obama was up to with the pension funds in trying to create an Infrastructure Fund ….. Calpers,California pension fund, is selling off $4 billion of hedge funds to divert that money to be wasted in Obama’s dream project – the infrastructure fund .. This idea was floated and endorsed at CAIRNS ..  These are being called Public Private Partnerships (PPP), and will be extremely critical in the future for here lies the final destruction of the pension funds precisely as Japan bankrupted the Japanese Postal Saving Fund using that private money for political purposes to try to stimulate the economy, which failed. With PPP, public funds will be sold to the public as being a highly professional long-term investment that will further shrink economic growth and liquidity. They cannot possibly work .. How do pension funds make money on repairing infrastructure? Toll booths will pop up everywhere.”

– Martin Armstrong

LINK HERE to the article


09/26/2014 - Mike (Mish) Shedlock Talks Financial Repression

Special Guest: Mike (Mish) Shedlock – MISH’S Global Economic Trend Analysis

 


09/26/2014 - Douglas E. French discusses Financial Repression

Special Guest: Douglas E. French – Author, Past President of the Ludwig von Mises Institute and noted Casey Research Contributor

 

The biggest bubble we have is US Treasuries. The believe you can’t get hurt is a quality you always see in a bubble. The idea that lending an entity, that is $17T and going to $18T and beyond in debt, and will never be able to pay that back and the idea that you will get 2.5% for 10 years and it is ‘return free risk’ is certainly bubble territory!

FINANCIAL REPRESSION

“You have PhD’s at the Fed trying to create economic growth with inflation and low rates. The repression is that people like you and I won’t ever be able to retire because we won’t be able to get any return on our money so we can prop up the government and keep it in business.”

This is the overall Macro Strategy of the government but central planning has never worked! ….. They are essentially trying to print their way out of a jam! ……. Because of Financial Repression almost ¾ Trillion dollars has gone to the government that should be in private hands!!!”

FRENCH WARNS INVESTORS

  • People should be worried about their pensions,
  • People should be worried about the Fed’s Repo market and primary dealer delivery failures. This will likely be the cause of the next crash. Money Managers are playing musical chairs every quarter to keep this game going.
  • People should be concerned about liquidity seizures which need to be closely monitored as money managers currently scramble for collateral.
  • “Collateral through Rehypothecation has been pledged and pledged, over and over again…. the average person is going to extraordinarily shocked by something they never saw coming because it is something that is hard to explain and hard to understand”

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