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

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

LINK HERE to part 1
LINK HERE to part 2

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.

– Alasdair Macleod

LINK HERE to the source 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 Fed’s policy of financial repression sends the wrong signal. It punishes savers, such as pensions and retirees, while rewarding speculators and debtors. It is like giving my son ice cream after he yells at his mother and punches his brother.

If the Fed is so worried about the economy that they have to keep rates low for a very long time, then how can a corporation have enough confidence to want to begin a capital investment project? . Many Fed policies have been, or have become, counter-productive .. Fed policies and financial asset prices have recently reached their practical limits.”

LINK HERE to the source 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.

FT essay below which makes the argument he has been making in the past few years: Given the Federal Reserve’s ultra-easy monetary policies, including near zero interest rate policy & quantitative easing (QE), companies have a tremendous incentive to issue cheap debt to buy expensive stock, diverting corporate cash from creating jobs & investment.

Forbes essay references the recent emphasis in economics & business on “shareholder value”, how this emphasis has resulted in unintended consequences, one of which is the simple share buybacks trend of recent years .. lists several results associated with this “shareholder value” creed:

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.

Sick of the overbearing regulation, taxation, and entitlement mentality in society—in the book Atlas Shrugged, John Galt went to one entrepreneur after another to convince them that they just didn’t need to put up with it anymore.

They didn’t need to keep propping up a system that was trying to destroy them. Where’s the point in continuing to feed a parasitic system?

So one by one, these innovators and producers simply closed up shop, deciding to just “shrug” and abandon what they were providing thanklessly to the looters.

Today many companies are doing the same. They may not be abandoning their businesses altogether, but they are moving them out of the hands of the parasites by moving their tax bases abroad.

In Ayn Rand’s book, the Economic Planning Bureau dealt with this by legislating that no businesses could leave: “[a]ll the manufacturing establishments of the country, of any size and nature, were forbidden to move from their present locations, except when granted a special permission to do so.”

In real life today, we have a string of policies being proposed to similarly discourage companies from leaving, or failing that, to try to claw as much money as possible from them first.

Even the language used by these bill’s supporters is eerily similar to the novel, as politicians call for corporations to pay their “fair share” and bemoan that Americans have to “pick up the tax burden inverted companies shrug off.”

At the time, Rand might have thought that she was writing about an extreme, fictional society. But it seems that the Land of the Free is eager to exceed even her worst expectations.

When she wrote about the “Economic Emergency Law”, which forbade any discrimination “for any reason whatever against any person in any matter involving his livelihood”, she was likely thinking about criteria such as race, gender, and age.

She might have even considered they would try to prevent employers from making judgments based on a person’s ability, though I’m sure she would not have even imagined what politicians have actually come up with in the US.

NEW REGULATIONS

(LOOK PAST THE BILLS’ “SPUN” TITLES)

H.R. 5278: No Federal Contracts for Corporate Deserters Act

First, take the H.R. 5278: No Federal Contracts for Corporate Deserters Act, which bars federal contracts for American companies that have gone overseas for tax purposes.

H.R. 5549: Pay What You Owe Before You Go Act

Then take the H.R. 5549: Pay What You Owe Before You Go Act, which seeks the seizure of unrepatriated corporate revenue.

 S. 1972/ H.R. 3972: Fair Employment Opportunity Act

Try the S. 1972/ H.R. 3972: Fair Employment Opportunity Act that proposed to prohibit discrimination according to a person’s history of unemployment.

S. 1837: Equal Employment for All Act

Or even worse, the S. 1837: Equal Employment for All Act that would have prohibited employers from even looking at prospective employee’s credit ratings.

 H.R. 4904: Vegetables Are Really Important Eating Tools for You (VARIETY)

The literary similarities don’t just stop with corporations either. Compare the fictional Project Soybean, designed to “recondition” people’s dietary habits to the actual H.R. 4904: Vegetables Are Really Important Eating Tools for You (VARIETY).

Tell me, which one sounds more ludicrous to you? With each new piece of legislation being proposed in the Land of the Free, Atlas Shrugged seems to be ever more prophetic.

While even the most terrifying elements of the book are coming true, so are the reactions. People and companies are leaving, refusing the put up with the looting of their efforts any longer.

Despite politicians’ desperate attempts to stop it, Atlas is already shrugging.

“John Galt is Prometheus who changed his mind. After centuries of being torn by vultures in payment for having brought to men the fire of the gods, he broke his chains—and he withdrew his fire—until the day when men withdraw their vultures.”

LINK HERE to the source article

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

In his latest essay, David Stockman* explains how after decades of financial repression, central banks have created huge distortions & imbalances in the global economy – now they are coming home to roost .. the impossibility of zero interst rate policy (ZIRP) forever on central bank money printers is beginning to be recognized .. “Long-standing financial repression and absurdly low interest rates have generated malinvestments and debt burdens that are crushing enterprise and true economic risk-taking throughout the world economy. In the DM (developed market economies), the resulting malady is consumer balance sheets that are bloated with debt; and in the EM (emerging markets) the ill takes the form of vastly bloated industrial capacity and public infrastructure. So if there were ever a case of ‘physician, heal thyself’, this is it .. There has been no escape velocity owing to Keynesian stimulus. Massive central bank liquidity injections have remained in the canyons of Wall Street and other major financial markets where they have enabled endless free money funding of speculation and carry trades, but have contributed virtually nothing to spending by debt-saturated households.”

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.

Zero Hedge references the liquidity risks inherent in BlackRock’s & Pimco’s funds in the high-yield & emerging market debt markets .. “By now it is clear to everyone that the force-feeding of free-money into financial markets by The Fed et al. has led to a scale of financial repression never before witnessed as bond yields for even the riskiest of risky names collapse to record lows and cheap-financed share buybacks raise leverage to record highs and support an ever more fragile equity wealth creation machine .. The massive (and likely levered) positions The Fed has forced the world to take on by its repression face a dramatic liquidity risk cost if they are ever to ‘realize’ any gains from the Fed’s handouts (by actually selling) .. BlackRock: ‘The risk posed by investors trying to dump bonds after the raises interest rates is ‘percolating right under’ the noses of regulators.'”

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.

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

LINK HERE to the article

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.

ORIGINS OF US FINANCIAL REPRESSION

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

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

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

….. and you control Global Credit / Debt Growth

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.

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

LINK HERE to the article

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

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

– Russell Napier, CLSA

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

LINK HERE to the article

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.

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

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

LINK HERE to the 2-part essay

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

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

LINK HERE to the article

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

In July, Janet Yellen remarked about what seems to be her preferred choice, a topic that has been central to her Chair.

.. efforts to promote financial stability through adjustments in interest rates would increase the volatility of inflation and employment. As a result, I believe a macroprudential approach to supervision and regulation needs to play the primary role.

We are, as Yellen proclaims, in the capable hands of regulators and their “macroprudential” systems and arcana:

The Federal Reserve is stepping up its oversight of high-risk leveraged loans, shifting to a deal-by-deal review after its previous industry-wide guidelines were largely ignored by banks.

Truer words have never been written, as if you were observing the leveraged loan market from afar with little prior experience you would come to the conclusion that there was no such thing as “guidelines” in leveraged loans.

Until now, supervisors collected loan data in an annual survey, and last year told banks they needed better adherence to standards they put forth in guidelines in March 2013. Over the past several weeks, they have shifted tactics and are examining loans as they are made, showing a new urgency in avoiding the kind of overly risky lending that was blamed for igniting the financial crisis.

To sum up: the leverage lending market had prior guidelines that were supervised (using that term loosely) via an annual loan survey leading to a surge in the kind of “overly risky lending” usually reserved for the bitter ends of cycle peaks; and now, long after all that behavior has been entrenched and hundreds of billions of loans made, macroprudential policy wishes to step up regulatory pressure.

LINK HERE to 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.

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

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

~Now 15M under Salary Gap

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

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

LINK HERE to the article

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

LINK HERE to the article

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

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

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

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.

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

LINK HERE to the article

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.