FRA Co-Founder Gordon T. Long discusses with Global Macro CME Floor Trader Yra Harris, the difficulties of investing in the currently suppressed global market. Yra has been a member of the CME since 1977 and is a well-known global macro trader. Yra currently works with Vine Street trading.

YIELD CURVE

Yra distinguishes the 5/30 UST as much more of speculators curve, and the 2/10 UST, an investors curve, meaning people with a longer term horizon.

Regarding the flattening of the yield curve line: Yra references Paul Samuelson saying the stock marketing having predicted the past 9 of the 5 recessions, however the same cannot be said for the yield curve.

“When the yield curve starts to flatten, to ultimately invert, trouble looms”.

Yra believes that central banks eventually error one way or another, and ultimately cause the curve to flatten.

2016 PREDICTIONS

The market anticipates slowing growth, if not negative growth resulting in recession. The last time this was seen was 2006-2007. When the Fed was raising rates, driving the rate to 5.5% on the federal fund rate, the yield curve was flattening, and within 6-9 months later, the curve had inverted.

Yra combats the notion that the yield curve is a bad indicator by saying, “It is only a bad indicator because I cannot time for you, what the market’s reaction to it will be”

Yra mentions Stanley fisher saying that going to negative yields in the United states would be very difficult because of their money market funds.

“If the Federal Reserve of the United states went to negative yields it would be a catastrophic statement that they had panicked, indicating they have nothing left.”

Yra brings up Stanley Fisher saying the four rate increases are a probability.

“I’m going to watch what the metals market is doing. If the gold rallies while the curve flattens, it will be telling me that the market is getting fearful…meaning the central banks are losing control”

“The optimal control function is a myth. Economic analysis is not rocket science. Good science is the ability to continuously replicate an experiment and get the same results, this is not the case.”

Yra believes that central banks are not concerned about inflation, because banks have learned they can slay inflation, by raising rates high enough to stop it, which will and has caused the yield curve to invert in the past. Systems built on borrowing, such as China, would rather endure periods of inflation than deflation, deflation is 30% unemployment, everything stops. “run inflation hotter, because that’s the greatest thing to remove the overhang of debt”

“If you can’t restructure, and if you can’t write it off, because you’re worried about the banks, you have to create some inflation, and their fear is that they’ve been unable to.”

GEO POLITICAL TENSION — OIL & CHINESE MARKETS

Demand is contracting because the world economies are slowing down. The Saudis have built their structure based on that they felt comfortable that the United States and the six fleet would always be there to support them.

“Saudis are sending a message that they’re upset with the United states about a shift of policy, as they see it. We are at a critical junction, and I think oil is all part of it. All of a sudden the Saudis are going to do an IPO of Aramco, which will bring significant implications, they’ve never gone that route, why now?”

There is word that they’re short of capital, however it’s cheaper to raise capital in an equity capital than a bond market. Saudi reserves are not the collateral for those bonds. This is all tied into the price of crude oil.

 

“China is a great story, from an academic sense, but from a market sense I don’t trust anything that I read out of China”

Yra’s tongue and cheek example is Google not being allowed to be used freely, restricting the free flow of information.

“It’s amazing to me that this country, that does not allow free flow of information and data, can meet market projections at so many of their data releases. I don’t trust the (Chinese) data enough to trade.”

One thing that has always scared the Chinese authorities is losing control of the employment situation. Michael Pettis has talked about how the Chinese leadership has financially repressed the middle class, because they’ve kept the Yuan too cheap in order to build a vast pool of reserves. When a country wants to buy imports, they have to pay a greater price but the goal was to drive the export engine. When trying to make the shift from export oriented to a more domestic oriented economy, then a stronger Yuan is more desirable, which would make for cheaper imports.  Yra states,

“If you’re really trying to empower your citizenry, let the currency go higher.”

“China is still a totalitarian government, and they can inspire fear, which is what a totalitarian regime operates on”

THE FOCUS FOR INVESTORS

“We don’t have the play out of fundamentals that we used to. They will eventually play out because fundamentals will ultimately drive the market, they have to.”

Yra says that the equity markets are so linked and tell a global story, but believes that linkage is a false correlation.

“Monetary policy and financial acumen is still not rocket science” – It brings with it much uncertainty.

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 emphasizes how Canada’s deepening recession is likely to prompt the Bank of Canada (BoC) to go down into negative interest rates like parts of Europe are already .. the BOC has already hinted that Europe’s not-so-grand experiment in the Keynesian Twilight Zone known as NIRP (negative interest rate policy) may be about to cross the pond – “The effective lower bound for policy rates is around -0.5%,” central bank governor Stephen Poloz said in December, setting the stage for negative rates in Canada .. IceCap Asset Management sees the following scenario:
1. Canadian economy to be in recession in 2016
2. Bank of Canada will be at 0% interest rates in 2016
3. Bank of Canada will be at NEGATIVE interest rates in later 2016
4. Bank of Canada will be PRINTING MONEY in later 2016
Barclays says: “The BoC would need to cut at least 50bp this year to partially counteract the continued slide in crude oil prices .. the BoC would need to cut policy rates by at least 50bp in 2016.” .. The BoC itself estimates that the effective lower bound for Canada could be around -50bp, giving room for further cuts if needed.

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 central bank of China is targeting an early rollout of China’s own digital currency to boost its control of money in the country .. this is another development in the worldwide war on cash – how governments are limiting the use of cash or abolishing it outright .. it’s all about capital controls & financial repression .. governments are now anticipating bank bailins & negative interest rates, & by limiting or abolishing cash, this will minimize or prevent the possibility of bank depositors from withdrawing their cash from their bank ahead of or during a bank bailin .. People’s Bank of China statement: “To enhance the central bank’s money supply and currency in circulation control.” .. Zero Hedge commentary: “There are three enormous flaws with the war on cash: “One is that households and businesses have cash to hoard. The reality is the bottom 90% of households have less income now than they did fifteen years ago, which means their spending has declined not from hoarding but from declining income .. The second flaw is that hoarding cash is the only rational, prudent response in an era of financial repression and economic insecurity. What central banks are demanding — that we spend every penny of our earnings rather than save some for investments we control or emergencies — is counter to our best interests. This leads to the third flaw: capital — which begins its life as savings — is the foundation of capitalism. If you attack savings as a scourge, you are attacking capitalism and upward mobility, for only those who save capital can invest it to build wealth. By attacking cash, the central banks and governments are attacking capital and upward mobility .. When the dust has settled who ultimately benefits by this war on cash – government and the central banks, pure and simple.”

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 deliberates with Eric Sprott about the outlook for the global economy in 2016. Eric Sprott is a Canadian hedge fund manager and founder of Sprott Asset Management. He became a billionaire on paper with the initial public offering of Sprott Inc, the parent of his Sprott Asset Management firm. In August 2011, Sprott was acknowledged by Bloomberg as a ‘hidden billionaire.’ The publication estimated Sprott’s worth at $1.3 billion, largely based on his publicly disclosed holdings in Sprott Inc. and Sprott Physical Gold Trust. Sprott started his career as an analyst at Merrill Lynch covering everything but commodities. He eventually became known as a natural-resources and energy investor.

In 1981, Eric Sprott founded Sprott Securities Ltd. (now Cormark Securities Inc.), an institutional brokerage firm focused on small-to-mid capitalization companies, servicing Canadian corporate and institutional investors. In the year 2000, Eric Sprott made the decision to focus solely on the investment management business. Accordingly, the “investment management division” of Sprott Securities Inc which became one of Canada’s largest independently owned institutional brokerage firms. In 2000, Eric divested his entire ownership of SSI to its employees and chose to focus his sole attention on the investment management business and he formed Sprott Asset Management. In 2006, Eric was awarded the Ernst & Young Entrepreneur of the Year Award for Ontario.

In late 2009, Sprott published a well circulated white paper titled, “Is it all just a Ponzi scheme?” The document dug into who was actually purchasing recent Federal Reserve U.S. Treasury auctions and concluded that the biggest new buyer versus the previous year was the U.S. government.

Eric’s approach to philanthropy is straightforward.  He wants to help society change for the better. He is also constantly studying how to best serve his community through the foundation’s philanthropic donations. He believes that “the world needs true leadership to deal with unrecognized problems.”

2016: WHAT LIES AHEAD

“There is nothing constructive to say about the financial ponzi we have gone through since QE and negative interest rates were initiated.”

By knocking interest rates down to zero and in some cases they’re negative, savers are getting crucified. They get no return on their money. They have to buy the slimiest of assets, US bonds receiving 2%.

QE, printing of money will not do anything for the economy. We saw this with japan for the last 30 years. QE was only in place to inflate assets prices and we are all going to pay the consequences for that. It’s shocking that the market has held up as long as it has, and even more shocking is that during this whole process policies are so irresponsible that precious metals are not getting enough attention. I feel like a lone wolf believing that people should be in precious metals to protect themselves against this recession.

THE FOCUS FOR INVESTORS

“The most important thing is that roughly 97% of stocks are in bear markets throughout the world.”

Originally only a few stocks in the US were holding things up, and now they’re all getting crushed. In 3 months it would be no surprise to see every stock in the world being in a bear market. Furthermore it’s unbelievable to think you have a stable economy when oil prices are under 30. There are so many areas of falling prices; hitting or nearing all-time record lows.

“I do not have much hope for the economy right now; the stock markets are reflective of that.”

The whole issue of medical care in the US is being swept under the carpet; there are significant expenses for too many people. We need to be very careful about equity and bond investments. If you begin with the premise that the US is broke, you have $85 trillion of unfunded liabilities and a GDP of 18 trillion that says enough right there; it’s a joke.

This is why I preach to own precious metals because they will survive a financial meltdown. Risk mitigation is critical, but you have to understand all the elements of risk. It is phenomenal the risk that you will be taking in turn for the yield you’re expecting.

PRECIOUS METALS

Not to put a number on it, but I believe for the last 15 years the demand for gold has been well above supply and central banks have superficially provided the extra supply. The physical gold market may overwhelm the paper market, if or when it does you can imagine a recession or depression or even a currency crisis which is happening throughout the world.

BLACK GOLD

For oil, when you ask questions about markets that are dominated by paper and the influence of central planners it is difficult to give an answer that makes much sense. Ultimately oil should be going back up; very few entities can produce at $30/barrel. Sooner or later we will see shutdowns, and once that happens it will be highly unlikely for a restart until prices are at a profitable amount.

CANADIAN DOLLAR

“Government revenues are going to plunge coupled with stocks falling; 2016 is not looking very bright.”

It is a very tough situation because of oil prices are so devastating for everyone but particularly devastating for US and Canada. People are going to take all sorts of losses and reclaiming former capital. It is a dark hole where weaknesses are being amplified unless there is an outside influence to turn things around.

CLOSING STATEMENTS                 

“Seeing all the previous crisis happening from the Dot.com to the 2008 crisis you can see what is likely to happen here; it has just been postponed. But I suspect it will be worse, it will be global and it will not be as easy to fix as it was in 2008 because now it will have to be coordinated.”

It is a question of whether people believe or don’t believe in the market. Everyone realizes after what has happened is that there is a vulnerability in the market that people didn’t expect. Hopefully we will see signs of precious metals going up that will indicate the importance of focusing on the real issue in the financial system is today.

“All indicators are telling you that there is no recovery happening here anytime soon. It may just keep going down and potentially get violent. In the midst of all this the key thing is to focus on mitigating your losses.”

LINK HERE to info on SprottMoney

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.

“On the devastating long-term impact of the Federal Reserve’s zero-interest rate policy (ZIRP): with the real (i.e. adjusted for inflation) return on savings near zero (or even negative, for those who have to pay soaring rents, healthcare insurance premiums, college tuition, etc.), those saving for retirement are losing the Red Queen’s Race: no matter how much they save, the income will be too paltry to support retirement. This has three extremely negative consequences. Those seeking a return above zero are forced to put their savings at risk in boom-and-bust markets that tend to reward only those who get into the bubble expansion early and exit early. These boom-and-bust markets tend to savage the assets of the middle class when they blow up, but do little to rebuild these assets in the bubble expansion phase, as prudent investors who were burned in the previous bubble bust shun risk assets. The second negative consequence is the structural pressure on spending as those saving for retirement must sacrifice current spending to pile up capital to spend during retirement. No wonder the velocity of money is in free-fall–everyone hoping to retire on more than cat food has to set aside more of their earnings because they cannot count on any future earnings on capital. The third consequence is the destruction of middle class retirement. When a $500,000 nestegg earns a miserable $15,000 a year (3% annual yield), saving enough to generate a middle class income in retirement is beyond the reach of what’s left of the middle class.”

LINK HERE to the article

Is It Possible To Retire If You Have Little Or No Savings? LINK HERE to FRA’s Retirement Solutions

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.

According to a CNBC report:

“Retiring overseas is becoming increasingly common: Some 373,224 retired workers received Social Security checks overseas in 2013, the latest data available, up from 306,906 in 2008 and 246,890 in 2003.”

  LOCK IN YOUR LIVING ACCOMMODATIONS NOW

BARRIERS COMING DOWN

Previously issues like health coverage may have been an issue but today “In some countries the care is extremely inexpensive and high quality. In others, you may want to obtain global health insurance from a company like Bupa or Cigna.” 

Is It Possible To Retire If You Have Little Or No Savings? LINK HERE to FRA’s Retirement Solutions

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.

Discussion on the year ahead .. negative interest rates potential for the U.S.$ – unintended consequences .. the risks of capital controls .. malinvestments from ZIRP & massive money printing .. the importance of investment in real assets as stores of value .. how financial repression is intensifying  .. 48 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.

“Financial repression is a term used to describe measures used by governments to boost their coffers and/or reduce debt. These measures include the deliberate attempt to hold down interest rates to below inflation, representing a tax on savers and a transfer of benefits from lenders to borrowers. The resulting effect means funds are channeled to the government that would otherwise flow elsewhere.”[1]

It is an approach that indebted governments resort to, as a final measure to service their debt. Unfortunately it is the very thing that has been crippling the lives of seniors and/or anyone approaching retirement. The cost of living is increasing every year, pension payments are either insufficient or not being paid at all, money set aside from a lifetime of saving is inadequate and economic data being released by governments is skewed. In the midst of all this, how can pensioners enter a comfortable retirement? How can they survive on a $900/month pension when property taxes alone are double, triple and in the case of New Jersey, even quadruple that? They answer is, they can’t. Pension is just not enough.

In a recent publication, Charles Hugh Smith outlines a demographic issue; the weak purchasing power that pension funds will provide due to an inefficient ratio between full time workers and retirees:

“Today we are living nearly 20 years longer, and yet the ratio between full time workers and retirees has dropped to 2:1. There are 115 million full time workers and 57 million people drawing social security benefits, this is an unsustainable ratio. Two full time workers cannot support a retiree drawing medicare and social security.”[2]

A major mistake that came with the creation of pension funds was that the government did not account for an increase in life expectancy. In an era of low returns, and an increase in an individual’s life span, the promises that were made decades ago can no longer be kept today.

Financial repression cuts income to seniors and makes pension funds, a once reliable source of revenue, ineffective and unsustainable. This forces retirees to eat into their savings, which places pressure on welfare programs for the elderly and requires the government to spend more money to fulfill pension guarantees.

[3]

Above is a chart taken from Charles Hugh Smith in his article, The Coming Era of Pension Poverty. The chart shows the relationship between time and the percentage of the population receiving social security benefits. From the late 1970s until 2008, the number of people receiving these benefits grew at rate similar to that of the total population.  This constant growth was halted by a major event; the 2008 financial crisis. As a method to push the economy out of a recession, the Federal Reserve adopted a sustained low interest rate policy, but implementing this policy came at a severe time. It was during this time that the economy saw the largest workforce demographic shift, as the core workforce population, the baby boomers began to enter retirement.

The Pension Gap

Canada is facing a large disconnect in pension benefits between public and private sector employees. According to Canada’s Two-tier Retirement[4] a report by the Canadian Federation of Independent Business (CFIB), two-thirds of Canadians working in the private sector, or 80% of the country’s employees, do not have a company pension plan, whereas 87% of public sector employees have workplace pension plans which ensure benefits. To replace 70% of their working income in retirement, federal government employees currently contribute about 7% of their salary. To yield the same result, private sector workers would have to contribute up to 21% of their income.[5]

The CFIB illustrates the data by using an example with two characters, Mary, a public worker, and Jane, an employee in the private sector. They start working at the same time, earning the exact same annual salary over 35 years and making the same pension contributions. However, by the time they both retire in 2029 at age 65, Jane will have saved only $605,000 for retirement, while Mary will have accumulated roughly $1.38 million. This variance is because Mary receives greater contributions from taxpayers and she has a defined benefits plan which guarantees her benefits even in the instance of her pension plan performing poorly. This example clearly highlights a major unjust advantage of being a government employee. With millions of Canadians in the private sector having no workplace pension plan, even those with an employer-sponsored plan cannot hope to retire nearly as comfortably as government employees. The only way for retirees to increase their yields is to either continue working, or take on far riskier investments where seeing any return is bleak.

Pension Liabilities

Pension liabilities are the difference between the total amount owed to retirees and the actual amount of money the company has on hand to make those payments. A pension liability will only occur within defined benefits. These are traditional pensions where workers and their employers agree to contribute a certain amount into the pension fund over time for a guaranteed source of retirement income. Liabilities arise from 3 main sources:

1. Direct Funding. Organizations do not usually pay a pension directly. Instead, instead they buy annuities to pay the pensioner over the course of a lifetime. However the amount of money the organization needs to fund a guaranteed pension can fluctuate from year-to-year which can prove to be problematic.
2. Diverted funding intended for pension contributions but diverted elsewhere. Organizations may divert money scheduled for pension contributions to other areas of spending, while promising to fund the pensions at a later date.
3. Number of pensioners. A large amount of workers hitting retirement age at roughly the same time (the current case for Baby Boomers) represents a potential shortfall in the ability to meet pension obligations.

Canadians have known for a long time that the public sector pension scheme is unfair to taxpayers and small business owners, but it is also becoming clear that many public plans are structurally unbalanced and in need of immediate change. According to Statistics Canada, the unfunded shortfall for public pension plans across the country likely exceeds $300 billion. [6]

Governments have placed too much reliance on solving their pension problems through the revenue route, asking taxpayers to contribute more to compensate for shortfalls. Public sector pensions are seemingly unaffordable, increasing tax costs, further adding to public employees already high pension contribution obligations, or forcing governments to divert resources away from public services toward paying for retired employees.

With public sector earners collecting 8-17% more in wages per year than private sector earners in the same kinds of jobs[7], and pension entitlements that generously treadle off past retirement earnings, it is time to deal with the cost side of pension.

Miscalculated Living

For years the real purchasing power of social security benefits has been falling. In other words, the benefits seniors receive are considerably less than what their parents received decades prior.

The Bureau of Labor Statistics (BLS) uses a cost-of-living adjustment called CPI-W each year to calculate how much social security benefits should grow to keep up with inflation. The problem is CPI-W underestimates how much the cost-of-living for seniors increases each year and furthermore it distorts weights of goods within the basket.  To fix that, the BLS created a new index called CPI-E (E for elderly). Yet despite this addition social security benefits are still calculated using CPI-W.

An appropriate alternative to CPI is called the Chapwood Index. The components of this index were selected based the prices of the 500 most commonly purchased items on which Americans spend their after tax dollars on. The Chapwood Index found was that through CPI, the government completely underestimates the real cost of living increase for Americans. According to Ed Butowsky, founder of the Chapwood Index, “this is the main reason that more people are falling financially behind, and why more American’s rely on government entitlement programs.”[8]

“The data solidly supports what all Americans have suspected for years. The CPI no longer measures the true increase required to maintain a constant standard of living. Unfortunately, this negative trend has been in place for 28 years and has resulted in creating a crucial situation where most Americans need to start their own personal austerity measures by reducing their expenditures while demanding more from their savings and financial advisors.”[9]

Chapwood Index: Top 10 US Cities by Population[10]

The Chapwood index reveals that the combined Trailing 12 Month average for the top 10 U.S. cities was 9.7%; far more than the rate of the Bureau of Labor statistics CPI published. San Diego (12.0%) and San Jose (11.4%) top the list of U.S. cities with the highest cost of living increase nationwide, while Phoenix (7.1%) and San Antonio (7.9%) have the lowest.

The goal of the Chapwood Index is to shine light on a growing pandemic being fueled by the government. Information obfuscation and misrepresentation has been the cause of mass financial suicide. People need to take their finances in their own hands an impose austerity measures on themselves. Blind acceptance of statistics reported by the government is a problem which creates a false perception of reality and prohibits people from making appropriate financial decisions within their best interest.

The Means Test

Means testing is a controversial method for determining whether someone qualifies for a financial assistance program. Means testing was originally proposed for child benefit and is now being suggested for a wider range of benefits, particularly for retirees.

Means testing does not justly compensate the interest of the most disadvantaged people. The screening process involved to determine who is worthy of receiving government assistance is flawed. Large numbers of people miss out on benefits from either not knowing about them, not realizing they are eligible for them and most importantly, they are reluctant to claim them.[11] This is because of societal stigmas associated with receiving benefits flag people as being dependent. This is a common situation amongst retirees and can result in them encountering health and other problems from under claiming, leading to increased costs.

The drawback of means-testing gets even worse when it comes to how the policy shapes financial decisions. Means-testing entitlement benefits punish the very people who work the hardest and save the most. Majority of the population does not have the liberty to choose how many hours to work. For the majority, the choice is out of necessity and it is to work a full-time job (40 hours per week). Furthermore, because of the complicated ways in which federal welfare programs and taxes correlate, the effective marginal tax rates can be nearly impossible to decipher; their implicit negative externalities thus become difficult to act upon. The result is that most people in the prime of their working years will work as much as they can, regardless of marginal incentives.[12] Gracious retirement for our elderly should be a chief aim. Pensions are dwindling, and despite the assortment of retirement plans available, people still can’t save enough for a comfortable retirement.

In Closing 

The current system in place to ensure comfortable retirement is obsolete. Pension, this ingenuous allowance from the government is not nearly enough to even make ends-meat with. Lack of information combined with distribution of biased data prevents people from making financially responsible decisions. If you are like the most of us and are not a government employee, consider all your fruitful retirement plans gone. As mentioned in the earlier example, public sector workers receive from return from their savings and higher wages. But not just wages; it also includes benefits such as pensions, health, dental, and job security.

Harold Meyerson of The Washington Post proposes a simple plan; require employers to put a small percentage of their revenue, and a small percentage of their workers’ wages, into a private, portable, defined-benefit pension plan. To offset the increased costs, transfer the costs of paying for workers’ health care from employers and employees to the government, and pay for the increased costs to the government with the kind of value-added tax that most European nations charge. [13]

Additionally, allowing early access of pension benefits to middle income earners would encourage greater contribution. The thought of people having their money confiscated for many decades, with no access to it even in an emergency, often repels people from the entire notion of pensions. Allow people to access their own contributions but not the tax relief or employer contribution, which would be left to grow until retirement. End the transition to defined contribution plans. These plans are more confusing, expensive and less reliable than defined benefit plans, leading in most cases to inadequate pensions. Find ways to share the risk between employers and employees.

An immediate and drastic transformation is long overdue. With time the problem has only been getting worse as more and more people are entering retirement, and the portion of the population in retirement age increasing. The current pension crisis is a problem which affects everyone, regardless of age. Whether it will affect you or not is not a question of ‘if’ but rather, ‘when?’ Options are available and solutions do exist, but nothing can be done until more information on the issue is shed, for action cannot be done if a problem seemingly does not exist. Under the current structure it is without a doubt that pension is famine.

Karan Singh, Financial Repression Authority Columnist

email – karan1.singh@ryerson.ca

References

[1] http://lexicon.ft.com/Term?term=financial-repression

[2] Smith, Charles Hugh. “The Coming Era of Pension Poverty.” Web log post. Oftwominds.com. N.p., 2 July 2015. Web.

[3] iibd

[4] Petkov, Plamen. Canada’s Two-Tier Retirement. Rep. no. 5. Pension Research Series.

[5] Dodge, Laurin and Busby: The Piggy Bank Index: Matching Canadians’ Saving Rates to Their Retirement Dreams. C. D. Howe Institute, 2010.

[6] Statistics Canada. Table 280-0007 – Trusteed pension funds, funds and members by sector, type of plan

and contributory status, occasional (number), CANSIM (database). (accessed: 2015-12-26)

[7] Canadian Federation of Independent Business, Wage Watch: A comparison of public-sector and private

sector wages, Dec 2008. http://www.cfib-fcei.ca/cfib-documents/rr3077.pdf

[8] http://www.chapwoodindex.com/

[9] iibd

[10] iibd

[11] Lawson, Richard C., Noel Card, Heather Jerbi, and Craig Hanna. Means Testing for Social Security. Rep. Washington: American Academy of Actuaries, 2004.

[12] Brewer, M., Saez, E., & Shephard, A. (2010). Means-testing and tax rates on earnings. Dimensions of tax Design: the mirrlees Review, 90-173.

[13] Meyerson, Harold. “Steering America Toward a More Secure Retirement.” The Washington Post 26 Mar. 2013

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.

Key points & quotes on an interview with Financial Sense ..  he sees a “a peak in the credit cycle” & thinks the Federal Reserve may have to reverse course this year in light of a potential liquidity crisis .. “There’s concern (and you’re seeing it in the market from those who understand what’s going on)… that because we have so much collateral pledged to support debt and credit right now that when that collateral falls in price as we’re seeing in oil and commodities, you get margin calls and if you don’t have the liquidity you’re caught and you’re caught in a serious problem.”  .. identifies 1820 on the S&P 500 stock market index as the point when central banks will react with new policies – which will cause more adverse risks to investors, savers & retirees from the unintended consequences of financial repression ..  “We are going to see negative interest rates potentially…we already have $5 trillion in bonds around the globe trading negative…there are all sorts of things that the central banks could do other than just interest rates and they will do them when the collateral is in jeopardy because it will bring down the entire system.” .. emphasizes how the burdens of debt, the challenges of meeting unfunded pension liabilities & reviving the economy are not just about the U.S. – it’s the same problem in the UK, Europe & Japan .. “The Fed is boxed in—they are trapped right now…they can’t raise rates. We might be able to raise another half (of a percent with) two more twenty-five basis point increases possibly but I think personally a recession is looming… the global slowdown is serious and significant and it’s washing ashore very quickly in America.”

LINK HERE to the article

EXCLUSIVE TO FRA – LINK HERE to the entire podcast – permission granted by Financial Sense to make the whole podcast available to our readers

LINK HERE to Financial Sense’s podcast service

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.

“Nothing is risk-free in this system of chaos. And there is no longer any easy solution to safely grow or preserve your capital. Risk is now everywhere. If you invest in the markets, there is risk of temporary or permanent loss of capital. Even if you do nothing and simply hold cash in a bank, there is bail-in risk and financial repression. This is our reality now… the consequence of a financial system that’s at least a century old. In a way, today’s mad scientist central bankers have engineered financial dinosaurs back into our time. They think they can control the system.”

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.

When the next financial crisis comes – the big banks could save themselves by confiscating your money right out of your checking account. Banking expert Ellen Brown, Public Banking Institute/Web of Debt/The Public Bank Solution explains how in Conversations with Great Minds. .. it’s financial repression .. 13 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.

Special Guest: Adam Taggart – Co founder, Peak Prosperity

FRA Co-Founder Gordon T. Long interviews Adam Taggart, regarding his new book: “Prosper! How to Prepare for the Future and Create a World Worth Inheriting” co-authored with Chris Martenson PhD. Adam is an author, and the Co founder of Peak Prosperity, a website created to help individuals make appropriate and informed financial decisions.

“We fell from a certain height in 2008, we’re at much higher heights in many other areas right now, and none of the fundamental causes of the 2008 crisis have been resolved or satisfactorily addressed”

Adam says that if in 2008 we only fell from about halfway up the ladder, we can expect a much greater upcoming fall which will be faster and hurt more. He is a strong believer in taking prudent preventative action, before a major correction. “Everyone wants to buy insurance after their house burns down, but it’s too late then.” This book is intended to aid people in taking informed steps to minimize or possibly avoid upcoming financial pain.

KEY MESSAGE OF THIS BOOK

Developing Resilience

“Resilience is the ability to be as least changed as possible by a change in your environment”

‘”Developing investments today that are going to protect you against the greatest and most likely risks”

Drawing from the permaculture school of thought, there are 8 forms of capital to address when developing true wealth: Financial capital, living capital, material capital, social capital, emotional capital, knowledge capital, cultural capital, and time capital.

Adam mentions it is important to realize capital is able to be exchanged from one form to another. Financial capital is often the first thought of form of capital, but Adam says it is important to consider the other seven forms of capital. Adam recommends people look upon these 8 forms of capital and examine where they have a deficit and where they have abundance, and encourages them to prioritize their time in reducing the deficits and not just focus on one or two.  This framework of 8 forms of capital will work for anyone, regardless of their socio economic condition

Adam mentions that everything in this book is common sense. Gord references a Will Rogers quote, saying, the most uncommon thing is common sense.

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.

A government agency in Zug Switzerland wants to be paid as late as possible to avoid having to pay negative interest rates on the payments it receives .. Mish Shedlock*: “I will gladly receive on Tuesday what you may wish to pay today. Is a fine for bill prepayment the next logical step? Think about that for a second. Rather than getting individuals and corporations to spend (the desired central bank action), negative interest rates (not yet tried at the consumer level) just might get everyone to pay their bills early. Going one step further, if lending rates are low enough, people could borrow money at negative rates and park it under their mattress or in safe deposit boxes and make money by borrowing. Please take the money! Just promise to pay me back whenever. More realistically, negative interest rates on consumer deposits will cause a run on the banks.”

LINK HERE to the commentary

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.

“When we next have a recession in the US, the Federal Reserve will give us QE 4. They are going to base their monetary policy on the data they have at the time, even though all their own research says that the last round of QE really didn’t do anything. They will once again push us into a world of financial repression malinvestment because they will feel the need to ‘do something,’ and about the only thing they will be able to come up with is more quantitative easing. Which will force the world into yet another mutually destructive round of competitive currency devaluations. The image that springs to mind is that of a circular firing squad, with the participants being the world’s major central banks, some of which actually do have bazookas. As usual, the investors of the world will be caught in no-man’s land .. There is a significant part of me that now feels, or perhaps fears is the better word, that the Fed will embark upon an experiment with negative interest rates in the world’s reserve currency.”

LINK HERE to the report

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

“What is causing bank depositors to flee their banks in the first place? The answer is fear of bail-ins, confiscations, capital controls, and bank failures like we have seen in Greece and Cyprus. Recent examples include Portugal and Italy. These bail-ins are causing jitters. Can you trust Spanish banks? Italian banks? French banks? Greek banks? .. Depositors increasingly say no. And the recipient banks in Germany, Netherlands etc, don’t want to risk bonds in those countries when the deposits are transferred .. Do you think German banks are safe? If so, you are badly mistaken .. If Spain, Italy, Greece, or any country leaves the eurozone, someone will have to eat those imbalances .. How would the ECB would allocate those losses? Government, depositors, or bondholders will be bailed-in directly. Alternatively, the ECB will violate the Maastricht treaty and print the money to cover the losses. In that case, the euro will take a hit. Nothing in Europe is safe!”

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.

Recent research released by both the Pew Research Center and Gallup  warn of an accelerating erosion in confidence in our government, politicians and the political process. It is clear to most that we have a growing “Crisis of Trust” which is signaling a “Failure of Leadership” as governments steadily exert increasing power and authority over our lives!

FOUR YEARS AGO WE BECAME SERIOUSLY ALARMED!

In the fall of 2012 having become seriously alarmed, we wrote our annual thesis paper entitled “STATISM” and laid out the frightening direction of US political leadership. We had initially hoped it was a cyclical pattern which had reached a cyclical bottom.

WE FOCUSED, MAPPED & TRACKED IT

Our subsequent research efforts have resulted in a large supporting  video library of expert guest interviews at Macro Analytics  embellishing on each of the sequentially emerging boxes in the following road-map and additionally the creation of the Financial Repression Authority to understand how our sacred public freedoms were being unwittingly surrendered through financial bondage.

The detailed research included a focus on the driving linkages between the identified stages as the developed economies (and the US in particular) accelerated towards more centralized government control of almost all facets of our lives.

WHERE WE FIND OURSELVES TODAY

The facts are overwhelming and indisputable for anyone taking the time (which we did) to do their ‘due diligence’.  Time and space which we don’t have here.

As we now agonizingly watch the US Presidential Primary Campaigns, cognoscente of what we previously witnessed in the UK (Jeremy Corbyn), Italy (Beppo Brillo), France (Marie Le Pen) and a raft of other political hot areas, we see a now unquestionable deteriorating shift. A shift firmly rooted in a Crisis of Trust and a direct result of a Failure of Leadership.

ONE CRISIS WAY FROM A MONUMENTAL “TOTALITARIAN” MISTAKE

The Financial Repression Authority is presently concerned that a Geo-political event, conflict or crisis could soon  abruptly catapult the developed economies into a mistaken political direction and a deeper cyclical low. A cycle which is presently already on a dangerous trajectory.  Paul Craig Roberts (a former US Assistant Treasury Secretary) just frustratingly penned “The Rule Of Law No Longer Exists In Western Civilization” outlining the seriousness of criminal and immoral actions by the US government. He illustrates that the dictatorial methods  and unlegislated executive orders by the current President to overturn the Second Amendment are now the political leadership ‘order of the day’ and writes: “He (Obama) has the corrupt US Department of Justice, a criminal organization, looking for ways for the dictator to overturn both Congressional legislation and Supreme Court rulings.”

CONCLUSION

Paul Craig Roberts  and the Financial Repression Authority (FRA) sadly concludes – “Out of Evil comes Dictatorship”

As the insightful Canadian national anthem warns so well, we must all “Stand on Guard for Thee!”

Never more than today.

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.

Greg Hunter interviews Ellen Brown who warns that people are more at risk in the U.S. to lose their savings because the 5 biggest banks have nearly $250 trillion in derivatives. In a financial calamity that could cause mass bankruptcies, recent legislation says the derivative holders will be paid first. Brown explains: “The have super priority over everything. . . . All the creditors’ money will be taken in a bail-in. A bail-in is the opposite of a bankruptcy. In a bankruptcy, the bank is liquidated in order to pay off the creditors. In a bail-in, the creditors’ money is taken in order to keep the bank alive. So, we get to die while the bank lives instead of the reverse. They specifically say ‘creditors’ which means shareholders and bond holders, but what most people don’t realize is depositors are also considered creditors. When you put your money in a bank, it becomes the property of the bank, and all you have is an IOU.” .. it’s financial repression .. 24 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.

A MASSIVE ‘TAX GRAB’ MUST BE EXPECTED

The Financial Repression Authority sees the massive government tax grab already quietly underway accelerating in 2016 in most of the developed economies.

This ‘grab’ will be a desperate political act driven by underfunded, and in a significant number of cases, unfunded public pension which will unfold at all three levels of government, Federal, State and City /Local government. It will be disguised by different focal emphasis and appear to evolve in an uncoordinated manner – but it will occur!

To spot its telltale fingerprints we should expect the following words to become  much more prevalent in the “public narrative” throughout 2016 and to see EACH of these which we explore in this article to increasingly and significantly extract money from taxpayer wallets:

• Capital Gains Tax,
• Property Tax
• Global Wealth Tax (PFIC, FATCA, GATCA),
• Civil Forfeiture Fines,
• Means Testing,
• Licensing Fees,
• Usage, Tolls & Emergency Services Fees,
• Inspection Fees,
• Processing Fees,
• Fines (Police and Agency)
• Ticketing,
• School Activity, Equipment & Supply Fees,
• Inheritance Tax,
• Social Security Taxation Rate

The Wealth Effect is believed by the government to have pushed up taxpayer US Household Net Worth  by $30 Trillion or 55% from the Financial Crisis low.

The US government is coming after that money!  They see it as a “Honey Pot” that can’t be resisted.

The following is how the Financial Repression Authority expects the government to undertake this ‘grab’. However, never under estimate the government’s abilities to come up with new schemes to finance its insatiable largesse.

Let’s start at the bottom of the political machine by examining what City and Local governments are doing and planning and work ourselves up to the head of this gluttonous and uncontrollable monster.

City & Local Taxation – Property Tax, Fees & Fines

City and Local government have massive problems with underfunded Pension obligations. Costs for road and water services which have not received adequate financing are also coming due. Administrative, police, fire and teachers’ salaries are all relentlessly climbing along with generous benefits which have long ago been jettisoned by the private sector.

Unlike the Federal government, city and local government cannot “print money” but must cover their costs by primarily Property Taxes or by issuing more debt in the form of muni bonds. The problems have gotten so bad that cities like Chicago have recently been brought to court for inappropriately using bond issues to pay operating costs associated with meeting public pension obligations versus badly needed infrastructure repair. These desperate actions are symptomatic of the pressures forcing the following actions:

• PROPERTY TAXES will increase dramatically. Chicago and New Jersey property taxes have reached the point where people are being forced to relocate. Pensioners on fixed income are being forced to take out reverse mortgages to pay property taxes and keep their homes. Residential property taxes in many areas are routinely $15-22,000 on what would be considered the standard home in the area.

• FINES are on the rise as Police departments for example are increasingly expected to achieve income to match expenses where cities such as New York employ “revenue generating ticketing’ or where Virginia issued 6996 traffic tickets in one weekend in an effort to raise revenues for the state government.

Now even a minor violation as reported by our FRA guest Michael Snyder can put a massive hole in your wallet.  For instance, driving as little as 15 miles an hour over the speed limit in Virginia can get you a reckless driving charge that can carry a fine of up to $2500. So why the hefty fines? Well, the law increasing the traffic fines in Virginia clearly admitted why they are so high. “The purpose of the civil remedial fees imposed in this section is to generate revenue.” (Virginia Code 46.2-206.1)”

The Investigative Reporting Program at UC Berkeley with California Watch discovered that impounds at “sobriety” checkpoints in 2009 alone generated approximately 40 million dollars in towing fees and police fines. “Red-Light cameras” have become huge revenue raising tools in many areas of the country.  In Los Angeles, revenue from red-light cameras has doubled from $200,000 a month in 2007 to $400,000 a month at the end of 2009.

Expenses are accelerating due to Federal expectations of preparedness for the War on Terror and the epidemic levels of horrific Public Shootings. The police and first responders have an increasing fiduciary responsibility, however the funding is not coming with it.

The Daily Bell (Local Government Larceny) & NY Times ( ‘Black Lives Matter’) recently both explored the link between the need for local municipalities to generate revenue in the face of rising pension fund needs & budgetary pressures, with the increase in numbers of interactions creating frictions & “Ferguson Missouri” type outcomes.

“The intense spotlight placed on Ferguson, Missouri in the last year exposed a small-town government engaged in petty larceny on a grand scale. Duly elected officials supervised a police force that regularly shook down visitors and residents to generate municipal revenue. The area’s demographics ensured the victims were mostly poor and black, but similar official theft occurs in white-majority towns all over the nation .. Local governments all over the U.S. are not nearly as accountable to voters as they want us all to believe. They serve as the training ground for politicians who rise to higher office. That’s why higher levels of government are certainly no better and often much worse. People who run for local offices often start with noble ideals. Their ideals rarely survive once elected. A little power creates a little corruption – and usually leads to more.”

Martin Armstrong reports the extent to which this is now reaching as police are going after teenagers who just want to make some pocket money shoveling snow and it isn’t just an isolated incident.  “The police even in Philadelphia are targeting kids as they are in New Jersey. Many towns demand a license with paperwork and fees of $50+ to be paid to shovel snow!”

• EMERGENCY SERVICES are on the rise in a major way. An ambulance call to a private residence can easily be $4-5K. These costs are often not covered by medical insurance as they are seen as public services or matters of policy deductibles. The tax payer is caught between the two and the squabble results in crippling costs to the unprepared tax payer.

• USAGES FEES in schools are nothing new to already financially strapped parents, but worse is to come. Fees for extracurricular activities and equipment has been in place for awhile now but are rising significantly. Parents are forced to take out loans when their young student makes the regional, state or national levels of competition because of the costs the parent are expected to saddle. There is nothing any longer in the school system that is not being billed to the parent for and this will only increase. Parents have no choice.

• INSPECTION FEES are yet another example of how public services are being billed. From Building inspectors to almost any form of government compliance officer is now billing some or all of their activity to the public. These fees seem like “token amounts’ but are becoming areas of new found revenue. Police, and EMS’  “detail’ availability for construction activity and special events are all now routinely billed to the organizations involved and are becoming major construction expenses. These costs must obviously be passed on and are nothing more than a “stealth taxes” to the unsuspecting public.

The list is much more extensive than we are showing here and would take up too much space to show the forms that “new taxation” techniques are taking. In New England for example many towns are now offering nominal tax rebates for seniors and unemployed who volunteer to do community service work that was previously provided by town workers. Some would suggest this is a tax savings but in reality it is taxpayers doing work for the town for free when previously it was part of their local tax (which has only increased even with the rebate).  Is this not in really just another form of taxation?

State Taxation – Usage Fees, Licenses & Ticketing

The taxation problem only gets worse as government budget shortfalls get worse. Many of the methods used at the City and Local government carry over to the State level (i.e. Ticketing, Inspection and Fines). The States have additional methods:

• SALES TAX is the purview of state government and it has been increasing in most states. Illinois recently moved the Sales Tax to 6.25% but the real total  can be an extraordinary 9.75%. Illinois is not unique and more states can be expected to soon follow their lead.

• LICENSING is on the rise for almost anything that involves a government approval. With 88,000 pages of Federal bills in 2015 alone, many of these pages require new license fees to be paid. As an example of the degree it has reached, a dog being transported across state lines now requires quarantine and inspection. All of course billable for those even aware of such a law. Mandatory veterinary services (i.e vaccinations) government reporting can result in a new unsuspecting dog owner receiving a fine notification from the state for not having quarantined or had the dog inspected.

• TOLLS are on the rise to fund badly needed Infrastructure. At first glance this does not seem unreasonable or unexpected. Uproar in Rhode Island recently brought to light the taxation game going on. Monies from the American Recovery and Reinvestment Act of 2009  were given to the state to build a major state bridge. The state then placed a toll on the new bridge. The people fought it in court as “double dipping” and the state was finally forced to back off. As increasingly US public infrastructure is moved to private corporations this is nothing more than taxation in a different fashion as state taxes are not reduced for the gains on the private sales but rather the tax payers only see tolls or fees arise from what was formally covered by their state tax.

Federal Taxation – Global Wealth Taxation

• GLOBAL WEALTH TAX is presently having the mechanics for its implementation being put in place. In their October 2013 Fiscal Monitor Report to kick this off, the IMF painted a dire picture for advanced economies with high debt that fail to balance their budgets. The report builds a case for draconian measures including the direct confiscation of assets. On page 49 of the IMF’s report they state:  “The sharp deterioration of the public finances in many countries has revived interest in a ‘capital levy’— a one-off tax on private wealth – as an exceptional measure to restore debt sustainability. The appeal is that such a tax, if it is implemented before avoidance is possible and there is a belief that it will never be repeated, does not distort behavior (and may be seen by some as fair) .. The conditions for success are strong, but also need to be weighed against the risks of the alternatives, which include repudiating public debt or inflating it away (these, in turn, are a particular form of wealth tax—on bondholders—that also falls on nonresidents) .. reducing debt ratios to end-2007 levels would require (for a sample of 15 euro area countries) a tax rate of about 10 percent on households with positive net wealth.”

Forbes in their report “The International Monetary Fund Lays The Groundwork For Global Wealth Confiscation”  point out some of the IMF taxation guidance: “”IMF economists know there are not enough rich people to fund today’s governments even if 100% of the assets of the 1% were expropriated. That means that all households with positive net wealth—everyone with retirement savings or home equity—would have their assets plundered under the IMF’s formulation.” This is where the bankruptcy of the debt-mired western world is taking us – “capital controls and exit restrictions so the proverbial four wolves and a lamb can vote on what’s for dinner.”

The IMF report says “There is a surprisingly large amount of experience to draw on, as such levies were widely adopted in Europe after World War I.” The Forbes essay: “And we all know how well that worked out.”

For those who want to know more they need to study PFIC, FATCA and GATCA, all explained in Financial Repression Authority videos by those in the know.

• INHERITANCE TAX can be expected to return with a vengeance. With inequality in America so blatant that both Democrat and Republican parties are presently talking about it in their primary campaign rhetoric. The public will likely accept this tax of the “rich”. However the rich will find clever ways around it while the public will simply surrender its greatly reduced life savings which they were hoping their children could use to get themselves out of debt.

• MEANS TESTING is already gaining significant public “narrative” and so we should fully be prepared for means testing for Medicare and Social Security as the Baby Boomer bulge fully arrives over the next two years.

• CIVIL FORFEITURE is a major new tax device which allows the government to take people’s property, even if a person has not been charged with a crime. What does it take for law enforcement to take property? Nothing more than a “preponderance of evidence” that the property was connected with criminal activity. Jared Meyer of Economics21 explains: while most people think about forfeiture as taking the property of drug dealers or other criminals, the government has used civil forfeiture to take vast amounts of property from entirely innocent individuals.

The use of the civil forfeiture power has exploded in recent years:

• In 2001, $407 million was seized under civil forfeiture laws; in 2012, a whopping $4.3 billion was seized.
• From 2001 to 2012, law enforcement has taken $2.5 billion in cash from 62,000 Americans, all without warrants or indictments.

Meyer offers examples of forfeiture victims:

• When Roderick Daniels was pulled over for going two miles over the speed limit in 2007, police seized $8,500 in cash that he was carrying. Daniels had planned to purchase a car with the money.
• George Reby was pulled over in Tennessee for speeding and had $22,000 taken from him by a police officer. Again, Reby intended to purchase a car with the money.
• When small business owner Carole Hinders made multiple cash deposits of less than $10,000 into her bank account, the government suspected money laundering and took $33,000 from her.

What happens to the seized property, be it cash, cars, jewelry or something else entirely? When the federal government does the seizing, Meyer writes that the funds go to the Department of Justice (DOJ). The DOJ has an Asset Forfeiture Fund, which then distributes the proceeds for various law enforcement needs.

In the past few years, Washington DC police officers have made more than 12000 civil asset seizures under city & federal laws. In a “Stop and Seize” investigative series by the Washington Post in November 2014 they cover the fact in their sixth installment that “D.C. police plan for future seizure proceeds years in advance in city budget documents  … D.C. police have made plans for millions of dollars in anticipated proceeds from future civil seizures of cash and property, even though federal guidelines say ‘agencies may not commit’ to such spending in advance”.

VIDEO

Martin Armstrong cites: “Worse yet, cities need money desperately. They are now including civil asset forfeitures as part of their budget. In other words, police are under orders to confiscate your money for any excuse possible. This was the end phase of the Roman Empire. The army began sacking Roman cities on the pretense they stood against whoever the proclaimed to be emperor. Rome weakened itself and cannibalized its own civilization. This is what government is doing now in the USA.” He strongly warns: “never pick up a hick-hiker in trouble for if they have any drugs, even marijuana, there goes YOUR assets!”

The law lets the  I.R.S.seize accounts on suspicion, no crime required!  A NY Times article frighteningly highlights the growing phenomenon in the U.S. of civil asset forfeitures .. “Using a law designed to catch drug traffickers, racketeers and terrorists by tracking their cash, the government has gone after run-of-the-mill business owners and wage earners without so much as an allegation that they have committed serious crimes. The government can take the money without ever filing a criminal complaint, and the owners are left to prove they are innocent. Many give up.”

This is happening across America but especially in Texas, Tennessee, Michigan where it was reported that “a town of 150 people called Estelline Texas earns more than 89% of its gross revenues from traffic fines and forfeitures.

• CAPITAL GAINS TAX has become a strong political talking point after 6 years of unprecedented financial market performance. Political strategists know this must occur before we have the next market draw down. Taxes are 100% payable on Capital gains when they are earned but there is only a $3000 per year cap on write-offs on losses. Effectively the governments only wins and you can only lose on market investments.

• SOCIAL SECURITY TAXATION is something the Baby Boomer generation will soon learn about. They are under the impression they will pay minimal tax on their Social Security. What they don’t know is that over $33,000 in taxable income makes your Social Security payments eligible for a 50% tax. Over $44,000 and your Social Security tax payments become 85%. This has been quietly slipped into the tax code and no doubt will increase going forward. With Social Security indexed by a fictitious CPI, more and more Baby Boomers are required to work. This “extra money will only push them into this increasingly predatory tax position. To have a livable income baby boomers who are be pressured to stay working in greater numbers, may be forced to pay nearly all their Social Security to tax to survive.

To put all the above in perspective regarding  the degree of taxation we should fully expect, my friend and Macro Analytics Co-Host Charles Hugh Smith wrote this “template letter”.  It somewhat cynically outlines what we should soon expect from the government to help fulfill its escalating pension & healthcare promises to current & to retired government employees:

Dear Resident:

As you may have read, the costs of fulfilling our pension and healthcare promises to our retired and current employees have soared. As a result, pensions, healthcare and the annual interest due on city bonds (money we borrowed in the past) now consume all tax revenues.

Without additional funding, we will have to lay off all current employees and close City Hall, the libraries, the fire and police departments, parks and recreation, and the rest of the city departments.

To avoid this, we are asking you to approve increases in fees for use and the sale of new bonds to raise desperately needed funding.

The proposed fees for use:

1. A 50% annual increase in city garbage collection fees for the next decade, after which we anticipate an annual increase of 45% until 2096.
   2. Building permits for any project under $5,000 will cost a minimum of $5,000. Fees for larger projects will start at $10,000 and rise on a sliding scale based on the value of the project.
   3. Homeowners and contractors caught attempting to evade the building permit process will be fined a minimum of $5,000 or 200% of the estimated cost of their project, whichever is higher.
   4. All street parking in the city will require an annual parking permit of $1,200 per vehicle per year.
   5. Day use of all city parks will now cost $10 per family per day. Reserving BBQ grills and tables will cost $100.
   6. Internet and wifi service in the city will be taxed $1,000 annually per household.
   7. Residents will be taxed $100 each annually, payable on the first of January, for consuming the city’s air.
   8. Parking violations will be increased from $35 per violation to $500 per violation.
   9. Asking city staff for information about city regulations will cost $10, payable before the question is asked.
   10. All residents will pay a sidewalk usage fee of $100 annually.
   11. A hotel tax of 100% of the cost the room will be imposed from January 1, 2016, including private AirBnB rentals of rooms and apartments.
   12. Every home-based business must obtain a city business license annually for a sliding-scale fee that starts at $1,000. Anyone caught evading this tax will be jailed as a financial terrorist bent on depriving city employees of their livelihoods.
   Residents who cannot afford the new fees can deed their homes to the city, and pay rent to live in the home they once owned.

Unfortunately, the new fees for use will only pay a fraction of the salaries of our employees and managers, and so we also need your approval of new bonds:

BOND A: $30 million to keep the libraries open for two years.
BOND B: $30 million to keep City Hall open for two years.
BOND C: $30 million to fill the gargantuan potholes in city streets for two years.
BOND D: $30 million to keep the city parks open for two years.
BOND E: $30 million to keep the city Public Affairs department funded for two years, so they can continue explaining why the city is broke and why it’s such a great place to live.
BOND F: $30 million to hire retired employees pulling down $8,000 a month in pensions and benefits for $100,000 per year salaries as “consultants.”
BOND G: $30 million to fund a public-relations campaign for two years extolling the city’s “green initiatives” and selling the city’s potential to global corporations.
BOND H: $30 million to fund tax breaks for global corporations that open an office in the city.
BOND I: $30 million to fund studies on how to raise more revenues from fees for use.
BOND J: $30 million to fund more appeals like this for increased fees for use and the issuance of more bonds to fund everyday city functions.
BOND K: $30 million to purchase a surplus M1 Abrams tank for crowd control and to root out financial terrorists depriving the city of the revenue it deserves.

With your support, the city managers expect revenues to cover expenses by 2096, assuming the city’s functions have been fully automated and there are only 12 employees left managing the servers. Until then, please support our efforts to grow the city out of its budgetary hole.

Don’t say you weren’t warned!

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 Economic Collapse highlights the new bail-in system now in effect in Europe .. “This new system is based on the Cyprus bank bail-ins that we witnessed a few years ago. If you will remember, money was grabbed from anyone that had more than 100,000 euros in their bank accounts in order to bail out the banks. Now the exact same principles that were used in Cyprus are going to apply to all of Europe. And with the entire global financial system teetering on the brink of chaos, that is not good news for those that have large amounts of money stashed in shaky European banks.” .. details some of the verbiage from the announcement .. considers the possibility of bank bailins in the U.S.. it’s financial repression.

LINK HERE to the article

LINK HERE to European Parliament News

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.

“At the beginning of the financial crisis, there was much talk about financial repression — the ways in which policymakers would seek to control the use of our money to deal with out-of-control public debt .. We’ve seen capital controls in the periphery of the eurozone … Interest rates everywhere have been at or below inflation for seven years — and negative interest rates are now snaking their nasty way around Europe .. This makes debt interest cheap for governments .. and it forces once-prudent savers to move their money into the kind of risky assets that are supposed to drive growth.” – Merryn Somerset Webb in The Financial Times
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.