“The European Central Bank’s latest policy moves have shocked many observers. While the goal – to prevent deflation and spur growth – is clear, the policies themselves are setting the stage for severe instability. The policies in question include setting the interest rate on the ECB’s main refinancing operations to zero; raising monthly asset purchases by €20 billion ($22.3 billion) to €80 billion; and pushing the interest rate on money that banks deposit with the ECB further into negative territory – to -0.40%. Moreover, theECB has launched a new series of four targeted longer-term refinancing operations, which also carry negative interest rates. Banks receive up to 0.4% interest on ECB credit that they take themselves, provided they lend it out to private businesses .. The inflationary credit bubble spurred in southern European countries by the persistence of lower interest rates undermined their competitiveness and drove asset and property prices to unsustainably high levels. When the bubble burst, the ECB tried to prevent the excessive prices from returning to their equilibrium levels by using its printing press and promising unlimited coverage to investors. The latest ECB measures are just more of the same .. Neither monetary nor fiscal policy can substitute for structural reform. On the contrary, the more Keynesian and monetarist drugs are administered, the feebler the self-healing power of the markets and the weaker the willingness of policymakers to impose painful detoxification treatments on the economy and populace .. The worst effects of the ECB policy may be yet to come, if the eurozone’s still-sound economies also become credit junkies.”
– Hans-Werner Sinn*

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.

FRA Co-founder Gordon T. Long is joined by Christopher P. Casey in discussing the decrease in oil price and its potential effect on the global economy.

Mr. Casey is the Managing Director of WindRock Wealth Management, a registered investment advisor and wealth management firm that subscribes to the Austrian school of economics. Mr. Casey is a frequent speaker before a number of organizations and conferences, including USA Watchdog, GoldMoney, Freedom Fest, and various bar associations and radio shows, including weekly financial and economic commentary on The Edge of Liberty (WNJC 1360, Philadelphia).  His writings have appeared in a variety of publications and websites including The Ludwig von Mises Institute, Zero Hedge, Family Business, Casey Research, and Laissez Faire Books.  He is a board member of the Economics Development Council with the University of Illinois, a Policy Advisor for The Heartland Institute’s Center on Finance, Insurance, and Real Estate, and a Chartered Financial Analyst charterholder (CFA®)

COST PUSH INFLATION

Cost push inflation is a Keynesian concept that was developed to explain inflation during inflation; if any important commodity’s price rises, all other prices of goods and services rise. As we pay more, the standard of living would go down and inflation would creep in. But this actually puts downward pressure on other goods and services, so in the end the price level itself is largely unchanged.

“The price level is a function of the demand and supply of money itself, not of any individual commodity.”

It used to be that minor shifts in the oil price had profound impact on the economy, but that isn’t the case right now. Oil went from about $25 in 2003 to $140 in 2008, back down to $30 in late 2008, and $140 a couple of years ago. But have we ever seen a price level that rose or decreased according to the oil prices over the last fifteen years? The answer is no. The issue is that the Federal Reserve does believe in cost-push inflation, and they do think that deflation could be caused by lower oil prices.

“The great danger here is that they, in their mistaken belief that low oil prices could put a cap on any inflationary moves they do, as far as printing money, is that they could overshoot and end up causing more inflation than they intend.”

EFFECT OF LOWER OIL PRICES

“Lower oil prices are good for the economy, but not for the reasons people cite on mainstream media.”

There’s a possibility that this could spike interest rates, or mitigate a downfall in interest rates.

STATE OF THE OIL MARKETS

Lower energy prices used to be considered good for the economy, since people have more money to spend. But that’s going toward servicing debt; it’s not actually consumption, it’s going toward debt payments. There are also some real dangers that aren’t being discussed by mainstream media.

Oil production has increased about 85% since 2008, but what isn’t mentioned is how oil imports have decreased. It’s down from approximately 12% of total imports to 5% today, not just in Dollar terms but overall volume.

The price has dropped 60% in the last five years. Oil producing nations are making less Dollars from the US customer. This is a problem because there are limited options for what they can do with those Dollars, so the US’ major trading partners and oil producing countries hold a massive amount of US treasuries. If they reduce their purchase of US treasuries, that could increase interest rates.

“Interest rates would have fallen further, but for the selling or lack of demand from these oil producing countries.”

SAUDIA ARABIA PEG

The Riyadh is pegged to the US Dollar at 3.75 Riyadh to the US Dollar, but their economy is under strain and their deficit is staggering. In any fixed exchange rate, the only way to keep it is through manipulation of the currency market by active buying and selling of Riyadh and US Dollars, but that is only making them go bankrupt faster. This could ultimately affect US interest rates as well.

OIL SUPPLY & DEMAND

With multiple countries putting out as many barrels of oil a day as possible, there’s pressure to keep the oil supply up and maybe keeping oil prices down. But if the world economy falls off significantly, there will be a decrease in demand and then cut backs and lots of capital not invested. Then if demand rises there won’t be much capacity, which makes the market volatile. The banks are holding out in the hopes of a rebound, because they have so much debt outstanding to the oil industry. Eventually this will either create incredible inflation or a banking crisis.

“The banks cannot put up with this kind of strain . . . it’s kind of like being a patient and your doctor, who would be the central bank, is subjecting you to stimulants and depressants whether its quantitative easing or negative interest rates.”

FEDERAL RESERVE’S MISCONCEPTIONS

Regarding the nature of growth, history shows that the key is a high level of savings and decreasing government intervention. Another is the idea of deflation being bad; for example, the US experienced experienced two 30-40 year periods where the price level fell by half, but it was also the greatest period of growth in US history. The Federal Reserve also has misconceptions about inflation’s impact on unemployment, and interest rates, which could cause a banking crisis.

ADVICE FOR INVESTORS

If people believe that the oil market will create a banking crisis in the future, then they need to look at assets outside of the banking system. Gold and silver should absolutely be considered as part of their portfolio since it’s much safer than a number of currencies, as it has alternative value. Farmland is also an excellent inflation hedge and pays a dividend, unlike precious metals.

“A lower oil price, although all things being equal is good, there are some real dangers: there is the danger it could increase interest rates, there is the danger it could increase inflation levels… and there is the danger it could induce a banking system crisis.”

Abstract by: Annie Zhou: a2zhou@ryerson.ca

Video Editing by: Min Jung Kim <minjung.kim@ryerson.ca

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.

Forbes essay highlights how investing today is a lot of about guessing what the policy of central banks will be going forward .. “What is going on? It’s called ‘financial repression.’ It’s a technique whereby government transfers private wealth into public coffers by raiding savings and capital by the fixing of interest rates. If a saver is paid less interest than their money is worth, it is effectively being drained away to the benefit of borrowers. We of course know who the biggest borrowers are: the bosses of central banks, their governments. It is this draining of wealth from the private sector into the public sector that is causing the bubbling rage in America. Many know they are getting poorer but don’t know how it happened. Financial repression is the tool that is strangling the American middle classes and after all these years most are none the wiser.” .. explains how financial repression is going to be around for a long time – resulting in economic stagnation .. “The core problem underlying this situation is that ‘financial repression’ is building up ever deeper channels for economic difficulty. While removing the volatility of markets with a ‘curated’ economic reality, it removes one of the key drivers of economic progress, the link between risk and reward.”

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.

– Denis Kleinfeld, wealth protection lawyer

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.

Coping with Financial Repression

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Professor and CEO of Create-Research Amin Rajan shares his knowledge with an in depth interview on Risk Mitigation and how European Pension Plans are Coping with Financial Repression with FRA Co-Founder Gordon T Long .

Amin Rajan worked as an economic forecaster in the UK treasury for over 8 years, and since then has been focusing on investment matters driven by macro investment behaviors catering to pension funds, insurance companies and wealth managers.

What Structural Solutions Are Being Adopted to Cope With Financial Repression.

1. Risk focus has shifted from the past to the future
2. Structural solutions are being adopted
3. The resulting personalization of risk is an Everest of a task

Personalization of Risk

Amin Rajan thinks that there are two leading principles that must be noted when looking to mitigate risk in the future, since the risk in the past is much different from today with a huge emphasis on macro risk.

Firstly, the sources of risk in the future will be different from the past, referring to the debt crisis and the threat to the Chinese markets.

Secondly, he believes that a portfolio investment should be looked at as a whole and protected as a whole, instead of looking at individual positions of your investments.

“The next crisis will be caused by systemic forces and will not be your usual crisis”

Currently pension funds are facing a very difficult situation where they are experiencing negative cash flows, due to the changing demographics in the United States. They are using up all their money on current retirees and not leaving enough behind for the later generations. The non investment approach would be to change your retirement age, you can reduce your liability by 3-5% each year of increase in retirement age. But it is not very easy to change benefits because these funds come fixed and are for the most part impossible to change.

“These pension funds are turning themselves into a ponzi scheme.”

Lately most employers are changing their employment plans and membership requirements, the new employees are no longer open to the retirement benefit plans. They are freezing the future accruals for existing employees; meaning your benefits are fixed today and your benefits are not a result of your future retirement level. Furthermore, they are moving away from employee’s final salary towards career average salary to further decrease the amount of benefits provided upon retirement.  However even with all these new policies being taken place there is still not enough cash for them to sustain because the level of debts are too big for pension funds to solve on their own, and Amin expects Washington to step in soon.

“We are transferring risk from people who couldn’t manage it (governments and employees) to people who don’t even understand it”

Retirement Taxation

Europe always had high taxation; retirees were always paying taxes on top of their social security income. In Australia however once the individual retires they take out all their money and spend it. Storing it away, buying property for their children instead of keeping it with the banks. This personalization of risk is nobody’s first choice it is their only choice because of their situation. Employers do not have the money to put into equity; governments are facing imperishable levels of deficits. So individuals are now facing more responsibility when they do not have the right degree of financial knowledge to do so, putting us all in a downwards spiral where no one can help anyone else when everyone is faced with ultimatums.

Amin thinks that there is a fourth leg coming up in the new generation of retirees, which is working a part time job after retiring because they are not able to sustain their lives on just their retirement benefits.

Amin Rajan tells us that we should question everything; we live in an environment where we must approach everything with an open mind. Do not assume things are automatically going to get worse in the future nor should we take anything for granted so always weigh your options before making crucial financial decisions.

All of Amin Rajan’s research journals and papers are available for free and online to contact him and inquire about Amin’s research please visit www.create-research-UK.com.

ABSTRACT WRITER: Saad Gohir sgohir@ryerson.ca

VIDEO EDITOR: Sarah Tung sarah.tung@ryerson.ca

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.

FRA Co-founder Gordon T. Long delineates political developments and their consequences on the global economy with Martin Armstrong, founder of Armstrong Economics.

Martin Armstrong began his studies into market behavior when first becoming fascinated by the events during the Crash of 1966. He pursued his studies of economics searching for answers behind the cycle of boom and busts that plagued society both in Princeton and in London. He began to do forecasting as a service to institutional cash market players in gold that included Swiss banks. Armstrong had the unusual background in computer science in hardware and software and was perhaps the first to begin to apply his diverse knowledge from two fields together. He began creating a global model in the mid-70s and was publishing the results from about 1972.

Armstrong began providing forecasts for clients generally three times during the course of each trading day, it began on a closed-circuit telex system – a forerunner to the internet among professional dealers. As a consequence Princeton Economics International, Ltdwas born. Armstrong became the chairman focusing on the research while the partners became the managing directors around the globe. By 1985, Armstrong was certainly one of the top premier Foreign Exchange analysts in the world. He stepped up in 1985 when James Baker was convincing President Ronald Reagan to create the G5 (Group of 5 now G20) nations to manipulate the currency values to affect the trade deficit, which became known as the Plaza Accord.

Armstrong’s work has become world renown. This model has successfully pinpointed not merely major specific days who events well in advance, but it has provided one of the most consistent guides for understanding the turning points in the global economy and thus the business cycle not merely within a domestic economy, but within the global economy on a collective basis. This has been demonstrated by numerous articles.

CHINA AND CURRENCY DEVELOPMENTS

“Pegs do not work and they always break because of politicians setting the value of something for private agendas.”

The Chinese are trying to maintain a controlled economy but they are losing the grip of it. Many people misunderstood the economic statistics because they do not understand what is happening.  You had many companies in Hong Kong borrowing in dollars, converting it back in and paying 1% then funneling it into China and collecting 5%-8%. People perceived this as the Chinese getting lots of capital inflow, and the economy doing good, but it had nothing to do with the economy. Following this, shadow banking was shut down and then it was perceived that the economy was going down, but it’s been going down since 2007. We have China in trouble, Japan’s currency is really a closed economy and these pegs are starting to go because the dollar is the only viable currency. You can’t park in China, they don’t trust the bonds yet, can’t go into Russia, and essentially all of Europe; therefore it’s been dollar by default.

“The dollar is the most liquid and the least ugly. It is the prettiest of the 3 ugly sisters. It is the rise in the dollar which will create the change in the monetary systems.”

A change will occur sometime around 2020, the whole thing with negative interest rates and quantitative easing just does not work. Economies are just much more fluid today. Emerging markets began expanding debt to more than 50% of US debt and they did this because they issued their debt in dollars because of low interest rates, and pension funds needed high yields so they went and bought all this emerging market debt. The money supply that supposedly the Fed increased did not stay here. If you look at real estate, the Chinese are the #1 buyer of real estate in the US, and the IRS is also buying lots of real estate in New York and Miami. It has been all foreign money coming in and it’s shown in the US stock markets. When the Japanese came in what did they do? They bought the high profile stuff, Rockefeller Center etc. Foreign money goes into the Dow, so the Dow lead the market all the way up, the other markets only began to overtake only when foreign capital began to subside.

“International capital flows are really what drives everything, but unfortunately it is something they don’t teach in school and not many pay attention to it.”

ECONOMIC CONFIDENCE MODEL

The economy peaked in September of last year on a global scale. Everyone is pretty much in recession, the US rallied a bit but you drive down a street and you see every office building has ‘space for rent.’ The business cycles do a good job in showing you where things are developing. The last peak was in real estate in 2007, but what is important about that is many of these markets peaked back then, and to this day markets have not surpassed that peak throughout the world.

The US is realizing that there is a problem here. The Fed has been lobbied by the IMF not to raise interest rates because of international concerns and not domestic concerns. They realize that with the dollar as a reserve currency, they are losing the power to control their own economy.

“International interest has taken priority over domestic, keep this going and the Fed won’t be able to do anything to help the US economy.”

Eventually the market is going to raise the interest rate, because we are in a phase now where governments are all in trouble. They are all chasing money, going bankrupt and keep raising taxes; just another reason why quantitative easing is failing. Disposable income is consequently shrinking rather than expanding. This is largely why Trump is doing so well, many people don’t understand it but the middle class has been completely devastated so it is more of a protest vote. The American people are starting to wake up to this problem, and even if Trump does not win we are projecting a congress turnover by 2018 which is similar to what happened in Scotland. This is not a domestic issue, it is happening everywhere.

Younger generations don’t understand the core facts either. The Clinton White House was bought and paid for by Wall Street. The press will never say this because they are afraid it might hurt Hillary, but who basically made all student loans non deschargeable in bankruptcy? None other than the Clintons. In other words all the student loans that are hurting all our youth, it is Hillary that did it.

PRECIOUS METALS AND HARD CURRENCIES

“You can go back and forth in arguments about gold but to the average person it means absolutely nothing.”

Things will only change when these people lose confidence in their government. For example, Republicans are tremendously against Trump, and they rigged the rules in the last convention to sabotage Ron Paul. They made rules that if you did not have enough votes your name couldn’t even be put in to be nominated, but under these rules the only viable person is Donald Trump.

The primary reason why Republicans do not want Trump in is because he is an outsider, he is not owned by the banks or by anyone for that matter; he has funded himself and they do not know what he is going to do. One thing from studying law that I carry with me is, you never ask a question that you do not already know the answer to. Politicians are mostly lawyers and they do not know what he will do.

MAJOR CONCERNS

“A collapse in the confidence of government is incoming, and that is when your markets are going to start responding.”

We are entering a political year from hell. Europe desperately needs Britain and if Britain votes to get out you will see other countries voting for the same thing. They are very much afraid of a contagion developing and the EU collapsing. Everybody criticized Trump for saying he wants to block Muslims from coming in, and what does Cruz say? He is going to implement a bill that all Europeans have to have a visa.

“They are looking at collapsing the global economy and they are destroying it with every breath they take.”

Abstract written by, Karan Singh  Karan1.singh@ryerson.ca

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.

Michael Lebowitz of 720 Global Research explains how central banks are lowering interest rates to encourage additional borrowing to drive consumption & lift asset prices; all in the hope of ultimately achieving economic growth .. “Years of policy designed to encourage spending and discourage savings is likely reaching the end game; the point where those exhibiting prudence must be punished to keep the game going. At some point, and likely soon, central bankers will be forced to realize the efficacy of lowering interest rates is vanishing and is hindering achievement of their goals. When this occurs a paradigm shift in the way monetary policy is conducted will likely occur. Investors that understand this dynamic, and what it portends, will be in a much better position to protect and profit from the asset price adjustments that lie ahead.”
LINK HERE to the analysis

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.

Central banks — and central bankers — are in uncharted waters. They don’t know how to create economic growth, they don’t know how to fight the great bogeyman of deflation, they don’t know how — or if — they’ll ever be able to return to a time of “normal” monetary policy. Their pretense of knowledge, of being able to effectively control currencies used by billions of people, is coming to an end. But it’s not just an academic issue — all of us are affected by the possibility of negative interest rates, prohibitions on cash, and bank bail-ins. Will you be able to get cash out of your bank or money market account if the economy suffers another crash? Will governments force us into cashless, digital-only payment systems, tracking our every purchase & creating black markets in the process? Will you have to pay your bank, in the form of negative interest rates, for the privilege of holding your money? And will your deposits take a haircut if your bank suffers losses from its bad loans? .. 19 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.

One of the great pillars of financial repression is obfuscation of data .. Over the past decade, we’ve been told that inflation has been tame — actually below the target the Federal Reserve would like to see. But if that’s true, then why does the average household find it harder & harder to get by? .. The ugly reality is that the true annual cost of living is far outpacing the governments reported inflation rate. By nearly 10x in many parts of the country .. This week, we welcome Ed Butowsky, developer of the Chapwood Index, to the program. His index is a ‘real world’ measure of how prices are increasing much faster than the wages of the 99% can afford .. 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.

FRA Co-founder Gordon T. Long is joined by Michael Pento in discussing topics from the government debt problem, the current boom in gold and the outlook of the dollar.

Mr. Pento is the President and Founder of Pento Portfolio Strategies (PPS). PPS is a Registered Investment Advisory Firm that provides money management services and research for individual and institutional clients. Mr. Pento is a well-established specialist in the Austrian School of economics and a regular guest on CNBC, Bloomberg, FOX Business News and other national media outlets. His market analysis can also be read in most major financial publications, including the Wall Street Journal. He also acts as a Financial Columnist for Forbes, Contributor to thestreet.com and is a blogger at the Huffington Post.

Prior to starting PPS, Mr. Pento served as a senior economist and vice president of the managed products division of another financial firm. There, he also led an external sales division that marketed their managed products to outside broker-dealers and registered investment advisors. Additionally, Mr. Pento has worked for an investment advisory firm where he helped create ETFs and UITs that were sold throughout Wall Street.  Earlier in his career Mr. Pento spent two years on the floor of the New York Stock Exchange.  He has carried series 7, 63, 65, 55 and Life and Health Insurance Licenses. Mr. Pento graduated from Rowan University in 1991.

KEYNESIAN INTEREST RATE MANIPULATION

“You cannot take interest rates down to zero percent and then into the negative territory, constantly increase the amount of something I like to call ‘quantitative counterfeiting’ and ultimately hope for a good ending. It’s just not possible.”

They’re constantly pushing interest rates lower and lower and now to the point where if you’re going to loan money to somebody, you’re going to pay them to do it. The reason their doing this as a method to make their debt serviceable; they need to make ends-meat so they borrow at lower cost. We know there is going to be a collapse because markets have been aggravated and not allowed to function for years.

“30% of all the worlds sovereign debt now has a negative sign in front of it, that’s $7 trillion.”

Here’s the main issue, let’s consider Japan: There is -0.1% for the Japanese 10yr note, an all-time record low. You’re loaning money to Japan, a nation that has 250% debt-GDP and you’re loaning this money going out for 10 years. All for the deal that you’re going to lose money each and every year in nominal terms, and then they have an inflation target and assuming they meet it, Japanese authorities will eventually step in and all of a sudden begin fighting inflation. The only thing this can lead to is an enormous implosion.

“Price discovery is essential, it is the nucleus of capitalism and we haven’t had it in decades.”

 SUSTAINING GOVERNMENT DEBT

“As debt has increased, interest rates have gone lower; it is all that they can do.”

When you base a nation’s growth, not on productivity and the size of the labour force, rather on market bubbles, furthermore when you consider there is 19-20 trillion in the US of outstanding debt; there is just no tax base that can finance this.

Look what Draghi had to do, it was not enough to buy $60 billion euros a month, they went to 80 billion, and why just buy government debt when you can buy corporate debt? These practise make no sense, seemingly there is no rationally thinking individual that enforces decisions.

We are stuck until we are hit with an inevitable implosion. The trigger will be when they reach their inflation targets and then become inflation fighters. There will be a period of time following this where you will see bond yield completely unravel, they will soar, and consequently stock prices and economic growth will plummet.

CENTRAL BANK PATTERNS

Local banks have their excess reserves at the central bank, and now the central banks rather than paying to keep the reserves, they are charging for the reserves. They are doing this so banks can go out looking for someone who cannot pay back in taking out a loan, else they will simply go buy more sovereign debt.

“Have we become such children in this world where grown men and women cannot just come forth and admit they have made a mistake and admit there will be a year or two of a recession or depression followed by prosperity?”

If you have so much debt which you cannot pay back, something has to change; the debt needs to be restructured. Debt is not fixed by artificially taking out interest rates and forcing individuals to take out more debt. We are not adjusting we just keep rolling the debt over and over.

“Capitalist systems do not work unless you have a cleansing at some point of excess debt. It is a healthy and necessary part of growth.”

THE GOLD BOOM

Well now in a time where if you stick your money in a sovereign note in a bank, you either get nothing from it or even charged for doing so, gold is definitely lucrative now more than ever. Additionally the ratio between gold miners and gold has never been lower than it is now. As interest rates go more and more negative across the globe, more and more money will be put into gold because for every ounce of gold you’ll pull out just that, an ounce of gold.

“The only escape is a deflationary depression on a global scale from the likes of which the world has never seen.”

ADVICE FOR INVESTORS

“Gold is going to be a winner no matter what happens, there is no losing scenario for gold.”

 To have 20-25% of my portfolio in mining shares which is high as far as Wall Street is concerned. So have gold, short in the market, and the only place being long is with energy. being long with energy as of late has proven to show great results. Forget base metals and in terms of energy it’s a great hedge in being short in the market.

THE FUTURE OF THE DOLLAR

“As I predicted, I have been on record in December of 2015 in saying the dollar will fall hard and it did.  I knew it was going to happen because I knew the economic data wasn’t supportive of floor rate hikes and this is what the dollar was priced in. It is important to question not what the dollar is going to do against the Yen and Euro, but moreover intrinsically against gold. I believe all the currencies out there are going to lose their value, the reason being that the real money out there and it has been for thousands of years, is none other than gold. “

Abstract written by, Karan Singh  Karan1.singh@ryerson.ca

Video Editor: Min Jung Kim minjung.kim@ryerson.ca

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 Michael Lebowitz on the Federal Reserve & Janet Yellen announcement this week that they will not try to aggressively raise interest rates & on the potential for going to negative interest rate policy (NIRP) in the U.S. .. Lebowitz thinks the Federal Reserve will likely start reversing interest rate hikes & cut towards 0 & into negative territory this year ..  says central bank policies from the U.S., Japan, China & Europe are driving people into gold along with the threat of NIRP .. 44 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.

Economist Stephen Roach explains how central banks are bringing “terror & mayhem” through negeative interest rates .. “you are changing the relationship between borrowers & lenders” .. the risk is banks make bad loans – this is what Japan did .. it will distort…. 4 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.

Faber emphasizes the power of free market forces .. says it would have been better to allow the economy & the financial markets to run their course during the financial crisis – it would have prevented an even bigger credit crisis .. on negative interest rates & helicopter money: “The magicians at central banks, they always come out with a new trick and these negative interest rates that we have today, this is for the first time in recorded human history from the times of Babylon up to today that we have negative interest rates, and it’s not going to end well. That, I can tell you. But the sequence of how it will not end well, I’m not so sure. But they still have a lot of ammunition. What they can do is helicopter money. In other words, they can send you and Mr. Bloomberg and me and everybody, say a check for $10,000, and that is like throwing gasoline into a fire…. will it help the economy? That is the question. It won’t help in the long run. You cannot grow an economy by just throwing money at people.” .. 2 clips

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 Daily Bell highlights the increasing trend of central bank-driven economies .. “This New 21st Century Economy features a tripartite stool of emergent monetary policies. The stool is supported by three legs. One is low or negative interest rates. The second is the ‘cashless’ society. The third is the ‘basic income.’ ..  These policies represent a fundamental shift in how economies operate. It changes the way we think about money and use it. We will need to consider it regularly when making plans for generating and retaining wealth .. Between depriving people of circulating money (cash), forcing people to consume via NIRP and providing people with a basic income for their lifestyle needs, central bankers intend to entrench the system so thoroughly that it will never be rooted out.”

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.

John Ing discusses the political & economic drivers of gold prices this year .. “Gold is a beneficiary of negative interest rates. Confidence in our central banks is fading fast as they attempt another unorthodox maneuver to revive the global economy. The dilemma for central banks is that their creation of money has been unsuccessful to boost spending but instead created bubbles while debt keeps mounting. What ballasts the U.S. monetary system is debt. In today’s volatile world, the metal is back in fashion due in part to the world’s central banks having exhausted the familiar false remedies. That toxic combination is good for gold, as is the coming election in the United States.”

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.

Article highlights the natural response by German bank depositors to negative interest rates in Europe – take your money out of the bank & put it into safety deposit boxes to avoid the negative interest rates .. “The Japanese response to negative interest rates was to buy personal safes. The German response is to pull money out of bank accounts and stick it in safe deposit boxes. Both are perfectly understandable reactions to the prospect of having to pay interest to a bank for holding deposits. It is particularly interesting in Germany, where the Bundesbank a few years ago admitted that the average real rate of return on savings deposits has been negative for nearly the past 40 years. Now that nominal rates have turned negative too, the facade of savings accounts as a safe place to park money to earn a little bit of income has finally been ripped away.” .. the article warns of a dire potential: “All it takes is just one more rate cut, one more move into further negative territory to push enough people off the edge, to get them to withdraw their deposits, which will result in a severe banking panic. Central banks are playing with fire when they institute negative interest rates and we’re all at risk of getting burned.”

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.

“There are many news stories circulating about the severity of the underfunded public pension funds. It seems that the ultra-low yields on sovereign bonds are preventing pension funds from meeting their funding requirements, especially as equity markets have been roiled by extreme volatility, which has led to diminished returns. Many pension funds have covenants preventing the use of high-risk assets and thus are subjected to the REPRESSIVE YIELDS SET BY CENTRAL BANKS. Fed Chairmen Ben Bernanke and Janet Yellen have told the ‘complainers ‘ to silence themselves about low yields because there have been many benefits to the policy of financial repression: Housing prices are higher; equity markets have risen dramatically; your grandchild or neighbor has a job and so on. But the bottom line is that the burden has fallen on middle class savers as their pensions have been the recipients of the Fed’s financial repression. It is not the wealthy who live off pension fund cash flows. This is a classic case of what Fyodor Dostoyevsky so beautifully detailed in the chapter from the Brothers Karamazov, “The Grand Inquisitor.” The story is the object of authority, miracle, mystery for it is the Fed’s authority that allows it the miracle of levitating the equity markets and its financial repression is but a mystery. After all, the FED has created the ultimate perpetual money machine as it earns profits that are handed over to the U.S. Treasury. So ends another week where we are hypnotized by the government’s ability to take our BREAD with the left hand and return the bread with the right hand and we buy more of the value stretched assets.” – Yra Harris

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.

The Financial Repression Authority is pleasured to be revisited by Ty Andros, Chief Investment Officer of the Sanctuary Fund. FRA Co-Founder Gordon T. Long has has a stirring conversation with Mr. Andros on a number of current economic developments and consequently, the things to unfold.

Ty began his commodity career in the early 1980’s and became a managed futures specialist beginning in 1985. Mr. Andros duties include marketing, sales, and portfolio selection and monitoring, customer relations and all aspects required in building a successful managed futures and alternative investment brokerage service. Mr. Andros attended the University of San Diego, and the University of Miami, majoring in Marketing, Economics and Business Administration. He began his career as a broker in 1983, and has worked his way to the creation of TraderView of which he is the CEO. Mr. Andros is active in Economic analysis and brings this information and analysis to his clients on a regular basis. Ty prides himself on his personal preparation for the markets as they unfold. Ty is an expert in applying the indirect exchange method as a principle of the Austrian School of Economics in his investing approach.

THE AUSTRIAN SCHOOL OF ECONOMICS

It consists of 3 major components.

1. Sound money and private property
2. Free market capitalism
3. Human behavior

The cycle we are going through now has happened hundreds of times in history and has led to the rise and falls of empires. It’s because of people forgetting the past and repeating the same mistakes. If you don’t have sound money, you really don’t have protection against the government. They can confiscate your money and they have been doing so since Bretton Woods.

“The money that we hold in banks is a worthless junk bond. The government has essentially become the mafia; they are scheming and transferring property to themselves.”

SOUND MONEY

The figure below outlines the specific functions of money:

If it doesn’t have these components then you’re not holding money. Until 1971 it had all those features, and it has been replaced with an I.O.U of fiscally and morally bankrupt politicians and banks. It is worth no more than the paper it is printed on.

“In my opinion, the gold and silver bear market is over so it is a prime time to start accumulating now.”

MARKET CAPITALISM AND WEALTH CREATION

Capitalism is about getting more for less and three groups of people being rewarded for it: The consumer because he is able to give his family a better life, the company which supplied it, and the employees within the company.

Socialism eats everything. Real wealth and income creation are in freefall. There will be no recovering. The confiscation of wealth is also known as runaway regulations, runaway debt creation, more taxes and currency debasement.

“Its pure confiscation, cannibalism, and slavery. It is eating the golden goose. It’s the people that aren’t self-reliant and don’t produce anything eating those that do.”

It’s pure confiscation, cannibalism, and slavery. It is eating the golden goose. It’s the people that aren’t self-reliant and don’t produce anything eating those that do. Nobody owns their homes, it’s simply a record that’s held in a database and all they have to do is misplace it. Nobody owns their stocks in their name and if you look at your banking agreement you don’t even have title to your money, the bank does. Slowly but surely they have removed everything. They don’t let you hold money because they can’t steal from it; real money has been outlawed.

“Gold is the currency of kings, silver is the currency of merchants, and debt is the currency of slaves.”

CURRENCY EXTINCTION EVENT

GDP is nothing of the sort, it’s just debt disguised as GDP. It is spending future wealth rather than creating future wealth for proper allocation to productive enterprises.

“We have nothing; we are just a bunch of debt slaves living in an illusion until we wake up.”

THE EVENTS OF 1971

President Nixon changed from a reserve backed system where the dollar was semi redeemable in gold and silver to a system that has no backing.

“It was the greatest heist in history. It was the greatest transfer of wealth from the public to the ‘bankseters’.”

He did this so that he wouldn’t have to operate in a prudent manner. Prudent manner means have to pass laws and have taxes which gives people a reason to get up in the morning and have the ability to do the capitalism which was discussed earlier. When you have bad laws and bad regulations, the economy will either collapse or they have to print the money to fill the whole; unfortunately they chose the latter.

“History has shown what happens to people who try to fix this system.”

Kennedy was taking the central bank back and creating silver backed money, 90 days later he was dead. Of course we will never truly know, everything is so covered up now and the government is incapable of telling the truth.

THE INDIRECT EXCHANGE

“This is how you go through a currency and financial extinction event. Exchange something of uncertain value, fiat money, for something of certain value, real wealth. This is the indirect exchange in simplest terms.”

So much of the ‘financialization’ of the economy is an illusion because it is not the real things going up; it’s the paper that they’re priced in losing its purchasing power

“The greatest applied Austrian economist in the world is none other than Warren Buffet. “

What Warren does is he sells paper which means liabilities are being debased by central bank’s printing presses and credit creation. If he writes an insurance policy for someone for $10 million, he now has a liability of 10 million, if he did this in 2000 that liability may be 5 million and simultaneously he took that money and bought the Burlington Northern Railroad, which is something that will just reprice to reflect the lower purchasing power it is denominated in. If we are in a depression or a boom, regardless the railroads will run. Half of his great track record is inflation that isn’t properly disclosed. He has been doing this since, coincidently 1971. He has been selling paper and buying real things with cash flow ever since.

Gold doesn’t cash flow but it is about to. Because of negative interest rates you’re paying somebody to borrow money from you. If you are able to hold your money without having to pay someone to hold it.The gold and silver bear market is over. As these destructive negative interest rates go deeper and deeper, people will eventually wake up. They’ve already woken up, this is what’s going on with the presidential race and particularly Donald Trump.

“This is the greatest insanity ever. It will be studied and written about for centuries. It is a much bigger example of stupidity and failing to learn the lessons of history. It is much larger in scale than the Great Depression because of the nature of globalization and the nature of man.”

Abstract written by, Karan Singh  Karan1.singh@ryerson.ca

Video Editor: Sarah Tung sarah.tung@ryerson.ca

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, Co-Founder of FRA interviewed Egon von Greyerz  in Zurick. Egon Von Greherz is the founder of Matterhorn Asset Management who has worked as a financial director for over 17 years in Geneva, and has been advocating for wealth preservation through Gold for over 13 years. MAM now has plans in over 40 countries for investors to place their savings into physical Gold storage for preservation in the world’s largest Gold vault in Switzerland.

Wealth Preservation

Egon says that approximately less than half a percent of assets are invested in Gold today by the people and that most of them do not own any Gold whatsoever. Even with the risky stock market in recent months we have not seen a significant increase in the purchase of Gold as an investment itself. However the increase in Gold purchases is linked more closely to the retail market for public use. Von Greyerz expects the market stocks to drop further down below their current value and is viewing the current spike in stocks as a mere bear trap, insisting that following this we may see a rise in purchases for gold.

“Less than half a percent of world financial assets are of gold today and that’s absolutely nothing!”

It is necessary to understand that gold is not to be viewed as an investment but for insurance purposes against all the property investments and bonds that you may have currently. For over 5000 years the price of gold has only gone up and the value of money has been decreasing ever since. With the expectation of the stock market dropping by at least 50% in its current state, having even 10% of your assets in gold will ensure the safety of your portfolio. The reason being that with the drop in stocks the price of gold compared to the dollar could be at a 1:1 ratio like the 1980’s meaning Gold will outperform all the other assets.

With only a .5% of current assets invested in Gold there is no current risk of a shortage of physical Gold. However, in the near future with the price of Gold expected to rise rapidly there is a certainly a risk of there being a shortage. If institutions, governments and pension funds begin to hedge their assets in gold there will never be enough Gold to satisfy their needs. Alongside rapid printing of money there will be no way to control the rapid increase other than to increase the price of gold itself to purchase smaller amounts of physical gold but for much larger prices to ensure that there is no shortage of real Gold.

“In the next few years it will be hard to get a hold of gold, as there will be a time when there will be no price offered in the market for gold due to its shortage”

Thoughts on NIRP and the cashless society

There are no positive consequences for this situation, Japan had other options but chose this disease which again will make no difference to either economy in the world. The negative interest rate will however stop withdrawals and place cash limits in Europe since people would rather take the money out and hold on to it rather than pay interest on it. But we should still expect more countries to go into negative interest rates even though it is hard to imagine this central bank policy to solve our economic problems.

Unfortunately there are not many other options for investors at the moment to encourage them to place their money elsewhere outside of the collapsing banking system. To avoid possible ‘bailins’ people can invest in property, fine art, and precious metals but not much else to be safe from this risk. Gold on the other hand has not seen a significant price increase and shows just how powerful it can be in the future. It is like holding real money it has the equivalent purchasing power to any currency in its history for the past 5000 years and does not devalue over time.

Even in the event that a bank does not have money to exchange for your gold you may still use it as barter, it has had this function throughout its history and will remain this way. It is an excellent opportunity for insuring your wealth and having liquidity at the same time. This is away from the banking regime and does not need to be declared to the IRS either for further taxation.

Furthermore, there is no safe spot currently to store your wealth other than a select few countries with good law and politics to ensure you get to keep what you’ve earned. Switzerland currently holds 70% of all the gold bars in the world and is by far the most secure location for storing wealth in long term.

Egon does not think that the current primary elections going on in the United States will have any effect on the current economic situation of the world. Referring to the fact that there is simply too much debt at this point and no difference will come from the selection of a new president. He suggests that there needs to be a complete systemic overhaul of the way the economic system works. Egon von Greherz publishes several articles weekly and you can find his research and upcoming investment opportunities online at www.matterhorn.gold or at www.goldswitzerland.com

ABSTRACT BY: Saad Gohir   sgohir@ryerson.ca

VIDEO EDITING BY:  Min Jung Kim minjung.kim@ryerson.ca

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.

Egon von Greyerz explains how ZIRP & NIRP is essentially confiscation of your money & it is happening now .. highlights also the growing potential for more bank bailins across the indebted western world .. negative interest rates leading to a cashless society leading to bank bailin confiscation of bank deposits – it is all related & connected .. “The biggest reason for creating a cashless society is stop bank runs. The banking system is insolvent and leveraged up to fifty times and even more if derivatives are included. This means that there is only enough money in the bank for one client in fifty or two percent of clients in total to take out their money. If more people tried, the bank would have to close its doors because it would be bankrupt. By stopping clients to take cash out, bank runs are no longer possible. In theory clients could transfer their money to another bank but that would also be stopped. So now the bank has your money, it charges you for that pleasure and you can’t get your money out because your money is frozen or confiscated. This is what has become of the bankrupt banking system .. When a bank becomes insolvent, depositors money will be used to save the bank and to pay the bank’s losses .. Another method that bankrupt governments will apply is to use bank deposits for forced savings. Every depositor will be obliged to put some or all of his cash into long term government bonds, probably for at least thirty years. It is easy to imagine that the money will be totally worthless after thirty years .. And if your money hasn’t been lost already after all the above, central banks are guaranteed to print enough money in coming years that most currencies will reach their intrinsic value of zero. Governments will have no other option in their attempt to save the financial system. We know of course that money printing can never save the world. All it will do is to add more debt, thus making the final collapse even bigger.”

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.